Why was Georgia the Richest Soviet Republic? Cold War DOCUMENTARY

Why was Georgia the Richest Soviet Republic? Cold War DOCUMENTARY

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Georgia is a country best known for rolling hills  and mountain ranges, its nouveau riche resorts on   the Black Sea, and its food and wine, which are  all delicious. Georgia is also a growing tourist   destination with a largely Western-leaning  population. Remarkably similar to the Soviet   period, in fact. The Georgian SSR was a popular  destination for Soviet vacationers owing to its   sub-tropical climate, and the benefits this  afforded the republic contributed to some   of the highest general living standards  in the USSR. But it also quickly became  

a pronounced hub of rampant corruption and  gangsterism. So, how did this come to be,   and how were such disparities possible in a  communist empire where citizens were supposed   to be equals? Did corruption help or hinder  Georgia’s success? I’m your host David and today,   we are going to look at the economy of  the Georgian SSR. This is…the Cold War. For some people, gaming is a hobby, while for  others, it’s a way of life, but we can all agree   that War Thunder has something for all gamers!  War Thunder is great because it lets me play   the game I want to…Do I want to engage in a  realistic tactical PvP battle? Or maybe a fast,   action packed game? I get to choose! This  is possible through the various immersion   levels offered by War Thunder, made to suit any  play style. And the historian in me loves the   choice of over 2000 tanks, planes, helicopters and  ships, spanning over 100 years of history from the   1920s to the present, which I can choose to take  into dynamic, combined-arms PvP battles. Find out   why my favourite is the B-2,9 with its ability to  devastate an enemy base! Thanks to the incredible   detail, even down to individual vehicle components  and in 4K, War Thunder offers a highly immersive   combat experience that I know you’ll love. You can  play War Thunder FOR FREE on XBox, Playstation or  

PC just by using our link in the description and,  if you are a new or returning player that hasn’t   played in the last six months, our link lets you  claim a Large Bonus Pack! This lets you claim   multiple Premium vehicles, Premium Account,  an exclusive 3D vehicle decorator and much   more but is only available for a limited time so  click that link now! See you on the battlefield! The Georgian SSR was created in 1921 amid the  throes of the Russian Civil War. It was one of   the earliest republics to join the Soviet Union,  officially incorporated as part of the short-lived   Transcaucasian SFSR, together with the Armenian  and Azerbaijani SSRs on March 12, 1922. Though   the Transcaucasian SFSR would be disbanded in  1936 and Georgia would become a constituent   republic in its own right from that point on,  it nevertheless remained under the centralised,   totalitarian control which characterised Josef  Stalin’s tenure across the whole of the USSR.  Stalin was born in the Georgian town of Gori in  1878 and his Georgian heritage did mean that the   republic enjoyed a degree of privilege as early  as the 1930s. Indeed, the now disputed region of   Abkhazia, which at the time was designated  an autonomous SSR within the Georgian SSR,   was Stalin’s favoured holiday destination.  He had a special dacha compound built on the  

shores of Lake Ritsa, for example, and the now  largely abandoned resort town of Tskaltubo near   Kutaisi in the Georgian SSR was built-up in  lavish fashion from 1926 onwards so that the   Soviet elite and privileged workers could take  advantage of the surrounding nature environment.  Even throughout the destruction of the Great  Patriotic War, Georgia remained a relatively   tranquil and untouched place. German forces never  reached Georgia despite their attempt to seize the   oil fields in Baku to the east. In Georgia, a  sense that Stalin had contributed to the defeat   of fascism undergirded a pervasive sense of  pride among many of his ethnic compatriots.  

The fact that Stalin’s right hand man and leader  of the NKVD, Lavrentiy Beria, was also an ethnic   Georgian only strengthened this sentiment. It  is important to note, of course, that at this   time Georgians were largely unaware of the scope  of Stalin’s and Beria’s crimes, like most Soviet   citizens before the period of destalinisation  under Nikita Khrushchev in the late 1950s. But   it would still be accurate to suggest that  the cult of personality surrounding Stalin   was particularly strong in his home republic. Perhaps ironically though, it was precisely   Stalin’s death in 1953 that would lay the  foundations for the Georgian economy to   truly boom in the subsequent decades. Indeed,  Khrushchev’s infamous “Secret Speech” at the   Twentieth Party Congress on February 25, 1956, in  which he denounced Stalin’s personality cult and   set in motion the processes of destalinisation,  was met with widespread anger among Georgian   communist politicians and the wider public.  According to historian Donald Rayfield,   this is because they felt that Stalin and Beria,  and by extension all ethnic Georgians, had   effectively been indicted by Khrushchev as bearing  responsibility for all the suffering in the USSR. 

This anger manifested itself in the form  of protests and riots. On March 5, 1956,   only days after Khrushchev had delivered his  not-exactly-a-secret speech and on the third   anniversary of Stalin’s death, several students  laid flowers on the embankment of the soon to   be demolished statue of Stalin that overlooked  the Georgian capital of Tbilisi. Shortly after,   as many as 10,000 people protested what they  considered an “act of colonial oppression” in   the words of Donald Rayfield. Protests also  broke out elsewhere in the Georgian SSR with  

two thousand people demonstrating on the  streets of Sukhumi in the Abkhaz ASSR,   twenty five hundred in Kutaisi, and a thousand  in Batumi. The Politburo was so shocked by the   reaction that Red Army and KGB troops were sent  into Tbilisi to suppress the unrest, resulting in   approximately one hundred and fifty deaths. Though the violence against the perceived   Russification died down relatively quickly  following the Politburo’s intervention,   the demonstrations did have lingering political  effects which can be linked quite directly to   the economic success Georgia experienced in the  1960s and ‘70s. This included the establishment   of several secret nationalist groups. For example,  Zviad Gamsakhurdia, the son of well-known Georgian   writer Konstantine Gamsakhurdia, revived the  Gorgasliani society with Merab Kostava which had   initially been set up in 1953 to defend Beria’s  legacy. But it was just secret societies…more   overt expressions of Georgian nationalism were  also openly permitted. In 1958, Stalin’s statue  

was replaced with the Kartlis Deda, the Mother of  Georgia, a monument which still looks over Tbilisi   today. These developments ultimately underpinned  and reflected just how spooked the Politburo had   been by the Georgians’ nationalist-fuelled  reaction to destalinisation. In this context,   the Moscow authorities granted Vasil Mzhavadnadze,  the First Secretary of the Georgian SSR from   September 1953 onwards, a relative degree of  de-facto autonomy within the Soviet empire   in the interest of maintaining order. OK, so, by the late 1950s the Georgian   SSR had carved out a special political status  for itself on top of the privilege it enjoyed   as a top Soviet tourist region. But, we told  you at the start of the episode that it was   going to be about economics! So to best explore  how these developments link to the economics,   we first need to explore the industries on which  Georgia’s economy was based. Tourism was obviously   important, but what did Georgia provide for the  USSR in an empire that placed so much emphasis on   agricultural output and heavy industry? Well,  according to statistics from The Caucasus:   An Introduction by expert Tom De Waal, just  one tenth of overall trade in the Caucasus   was conducted within the region itself, with  the rest going to other republics. Georgia was  

crucial to this export-based trade principally  because its sub-tropical climate enabled it to   produce things that other Soviet republics could  not. Specifically, the small republic of Georgia   was alone responsible for the production of 95%  of the tea in the Soviet Union and 90% of its   citrus fruit production. Flowers, tobacco, and of  course wine were some other major exports. With   more than 1/3 of Georgia’s then population of  approximately 4 million engaged in agriculture,   it is quite clear that this was crucial. And  that other Soviet hallmark, heavy industry? Well,   according to official statistics in the  1970s, heavy industry was responsible for   2/3 of the Georgian SSR’s gross output and  had grown five-fold since the early 1950s.  But, looking at official Communist Party  statistics doesn’t at all indicate that   these sectors made Georgia anywhere near  the richest republic in the USSR. In fact,   nearly the opposite is true. In terms of national  income, Georgia was in 7th place behind Russia,  

Ukraine, Belarus, Uzbekistan, Kazakhstan, and  Lithuania through the 1970s and ‘80s. In per   capita terms, one might expect Georgia’s overall  performance to improve given its comparatively   small population. But here, Georgia performed  even worse: in 1970, Georgia was in 11th place,   making it one of the poorest republics on  paper. Yet, paradoxically, a New York Times  

report from 1971 stated that: “nowadays fashion  and affluence walk the streets of the capital   of Soviet Georgia in droves of wet-look coats or  brightly coloured slacks for women, rarities in   most of the Soviet Union.” Meanwhile, the rate  of private savings in Georgia was approximately   double the rate of the average elsewhere in  the USSR, and rates of private car and home   ownership were also comfortably the highest. So  this begs the question: where did the perception   of Soviet Georgian affluence come from, and why  did official Soviet statistics not reflect this?  Well, the simple answer is that the Georgian  SSR was probably richer than the rest of the   republics in real terms, just unofficially. This  is where the political developments we mentioned   earlier come into play. Because Mzhavadnadze was  given a blank cheque by Moscow to govern Georgia   mostly as he liked provided he remained within  an ostensibly socialist framework, centralised   economic monitoring practices were relatively weak  in the Georgian SSR. The result was the emergence  

of a quasi-capitalist, underground economy. This  is generally referred to as a “shadow economy,”   or perhaps known better as the black market.  In practice, this meant that well-connected   individuals and party officials who ran  state-owned factories, in other words, any party   member or enterprise manager, stole state property  to produce unofficial goods which could then be   sold on the black market for a hefty profit. To give you a better idea of how this worked, a  

1983 research article by Gerald Mars and Yochanan  Altman provides an insightful example. Based on   stories from informants behind the Iron Curtain,  they found that one biscuit factory in Georgia   with 500 employees produced four biscuits for  illegal sale on the side for every ten biscuits   it produced to meet state targets, sold legally  on the official state-controlled market. This   research revealed similar examples from various  industries all over Georgia. From Moscow’s point   of view, then, they were satisfied: even if  state property was being stolen, they turned   a blind eye because production targets were being  met and Georgia remained politically stable. But  

Georgians were even happier: they were free to  benefit from the subsidies and goods the state   provided while simultaneously making some extra  rubles for themselves, all for minimal risk. The   fact that the more exotic goods Georgia produced,  like fruits, vegetables, and wine were difficult   to trace made black market trade even easier. Georgians were quick to identify the lucrative   opportunities that party membership and  high-ranking positions could provide.   The Georgian SSR thus ended up with the highest  per capita party membership of any republic in   the USSR despite being a reluctant member of the  union, by all accounts. Indeed, by 1982, 826 out   of every 100,000 Georgians were card-carrying  Communist Party members. Though this does not  

sound significant, for comparison the number was  774 in Russia and 706 in Belarus but more starkly,   in Turkmenistan and Tajikistan the numbers  were just 320 and 268 respectively. In such   a small republic, then, Georgia’s party  membership was disproportionate in both   per capita and real terms. But even ordinary,  non-Party members took advantage of Georgia’s   unique position within the USSR. In 1971, it was  estimated that private plots of land, a relative  

rarity in the Soviet Union, accounted for 40% of  Georgia’s overall agricultural output despite the   collectivisation of the overwhelming majority of  its farmland. The result was that many Georgian   farmers’ incomes were up to 10 times higher  than those of farmers in the other republics.  Perhaps most notably, these developments gave rise  to a series of corrupt businessmen in the ‘60s   and ‘70s who were intertwined with Georgian  politics at the very highest level. Otari   Laszishvili was one such businessman. First  Secretary Mzhavadnadze acted as his krysha,   meaning “roof” in Russian, a colloquial expression  for protection, and tolerated Laszishvili’s shadow   business empire in exchange for personal favours  and bribes. According to Mark Galeotti, it was   said that Laszishvili “had bath taps made of gold  at a time when ordinary Soviet citizens could wait   years for new fittings, and that he would fly to  Moscow to watch the Dinamo Tbilisi football team,   wagering thousands of roubles on a game.” So much  for the equality of communism, right? Another  

figure to emerge was the writer and businessman  Jaba Ioesliani, who lay low until the late 1980s   but quickly emerged as a well-connected,  powerful, and very wealthy nationalist leader,   just as the USSR collapsed. Such individuals were  known as the vory v zakone, or thieves in law,   during Soviet times, and many remain powerful  figures in post-Soviet countries even today.  We should point out though that the development  of a shadow economy was by no means unique to   the Georgian SSR. High-ranking party officials  were corrupt largely across the board. Take the  

Uzbek Cotton scandal uncovered during  the late Brezhnev era, for example,   in which over 4,000 individuals were eventually  found guilty of corruption offences committed   under the rule of First Secretary of the Uzbek  SSR Sharof Rashidov. Alena Ledeneva’s research   has also highlighted the pervasiveness of blat  among ordinary Soviet citizens. This is not to be   confused with the Russian word blyat which means  something very different.. In essence, the concept   of blat refers to the informal connections and  networks people relied upon to access rare goods   or services that were otherwise unavailable in the  inefficient planned economy of the Brezhnev era. 

But even if corrupt and informal economic  practices were an open secret across the USSR,   there are some well-researched cultural  factors endogenous to the Caucasus that   meant that they were especially widespread in  the region. Of course, the fact that Georgia,   alongside Armenia and Azerbaijan, were all  fairly autonomous from Moscow given their   strong and potentially threatening sense of  national identity that predated the Soviet   Union mattered greatly. Equally though, the  values of kinship and honour that underpinned   family and social ties were vital. According  to Gerald Mars and Yochanan Altman, “if trust  

is important to the second economy, networks  – particularly those based on the family – are   its backbone. In a highly personalised society,  where a person is measured on his honour – and   on the honour of his closest associates – the  body of people to whom he can personally relate   and through whom he can extend relations with  others who might latently provide significant   becomes an individual’s major resource.” In short,  the personalised and informal ties which enabled   illegal trade networks to thrive were already  well-established tenets of Georgian social life.   Informal economic practices thus went on largely  unhindered as people worked together to dodge   the state’s already weak enforcement practices. Of course, the scale of informality in Georgia   did not go wholly unnoticed by the  central authorities. On February 22,   1972, the Twenty-Fifth Party Congress denounced  Mzhavadnadze’s government for its corruption and   he was swiftly removed as First Secretary  of the Georgian SSR. His replacement,  

Eduard Shevardnadze, the same man who would later  go on to become Mikhail Gorbachev’s Minister of   Foreign Affairs in 1985, was appointed  as his replacement in July later that   year. Shevardnadze quickly sought to establish  himself as a fighter of corruption. Estimates   suggest that by 1977 alone 25,000 people had  been arrested on corruption charges, including   numerous party officials. He also dramatically  improved the official economic statistics of the   Georgian SSR in line with Politburo expectations. By this point though, Georgia’s shadow economy   was so entrenched and endemic that Shevardnadze  simply could not get rid of it in its entirety. In   the early 1980s, for instance, researchers still  estimated that 25% of Georgia’s gross national   product came from its shadow economy. Shevardnadze  was equally reluctant to place the Georgian SSR   further under Moscow’s thumb, which possibly could  have improved the official situation. Indeed,  

he managed to enshrine the official status of the  Georgian language in Georgia’s constitution in   1978, providing further evidence that Georgian  politicians were unwilling to compromise on   the relative autonomy and national expression  that they had become accustomed to. Georgia’s   shadow economy therefore continued to boom  secretly throughout the 70s and 80s. So much   in fact that by 1989 over 50% of Georgia’s  urban housing stock was in private hands.  But these good times would not last. In 1987,  Gorbachev passed the Law on Enterprises as part of   his perestroika reforms. The 1987 law stipulated  that state enterprises could determine output   levels based on consumer demand: they still had  to fulfil state orders, but they could do what   they wanted with any remaining surplus. Then, in  1988, Gorbachev passed the Law on Cooperatives,  

which legalised some private activity in the  economy. The problems these laws created are   extremely complex and multi-faceted, but  broadly speaking they can be boiled down to   two major issues. First, the state continued  to provide the raw materials for production,   but because the 1987 law effectively devolved  production targets to the individual republics,   the state destroyed its capacity to monitor  whether those centralised production targets   were actually being met. Second, and more  fatefully, the state continued to artificially  

subsidise the price of goods but simultaneously  legalised sales on the free market with the 1988   law. Prices on the free market were thus much  higher than those on the state-controlled one,   and therefore obviously more profitable. The outcome was that, rather than fulfil their   obligations to the state, which the centre could  no longer monitor, enterprise managers simply   started selling state-owned resources and goods on  the free market. The continuation of subsidies on   the official market meant that these sales tended  to be either on the black market or overseas,   magnifying the huge shortages of goods that  marked the USSR in the late Gorbachev period.  

Remember the example of the biscuit factory in  Georgia, where for every ten biscuits produced   for the state another four were produced for  the black market? Well now, the biscuit factory   didn’t even have to make the ten biscuits  for the state. And, to make matters worse,   this was now possible in almost every single  republic, industry, factory and farm in the USSR.  It is not difficult then to see how this  situation became totally unsustainable   very quickly. Though the dynamics unleashed  by Gorbachev’s perestroika reforms had been   taking place in Georgia for decades, the fact of  the matter is that the main reason the informal,   shadow economy was profitable for many Georgians  is because of the macroeconomic stability of the   official economy. In the late 1980s, however,  as previously state-owned goods and the means   of production became concentrated in fewer and  fewer hands, enterprise managers, party members,   and the thieves in law mostly, ordinary Georgians  who had benefited from the shadow economy in the   past were now left without their piece of the  pie. Thus, the private savings and property that  

they had built up during the preceding decades  were wiped out incredibly quickly as the value   of the ruble collapsed and inflation skyrocketed. By the time Gorbachev announced the dissolution of   the USSR in December, 1991, the Georgian  economy was in ruins, just like those   of the other former republics. Matters were  made worse when the first President of Georgia,   Zviad Gamsakhurdia, the same Gamsakhurdia who  had revived the Gorgasliani society in 1956,   faced a two year civil war as Abkhazia and South  Ossetia sought independence from Georgia. The   figures who had made their fortunes in the Soviet  shadow economy and then the collapse did not miss   the opportunity to form their own power bases  amid the fighting. Jaba Ioseliani, one of the   thieves in law we mentioned earlier, led the  Mkhedrioni militia which played a key role in   the violence of the Abkhaz war. Another, Tengiz  Kitovani, led the National Guard of Georgia. 

When Eduard Shevardnadze returned as the  President of Georgia in 1995, he ended   up appointing Kitovani as his Defence Minister.  This was highly emblematic of how Shevardnadze’s   governance of independent Georgia was based on  pacts and political alliances with former key   figures in the Georgian SSR’s shadow economy. Much  like how Mzhavadnadze had provided protection for   such figures in Soviet times, Shevardnadze’s  government was therefore characterised by   similarly shady dealings. Shevardnadze’s extremely  corrupt regime would eventually be overthrown in   the peaceful and popular Rose Revolution of 2003,  giving rise to the controversial figure Mikheil   Saakashvili who’s hard-line anti-corruption stance  to some extent represented Georgia’s first attempt   to truly eradicate the legacies of the corrupt  shadow economy that had emerged under Soviet rule.  Overall, there is lots to learn about the Soviet  Union through the lens of both the Georgian   economy and the republic more broadly. Georgia’s  case not only complicates the idea that the USSR  

was a totalitarian monolith, but also shows that  these differences resulted in surprising economic   disparities which perhaps foreshadowed those  that would ultimately lead to the final demise   of the Soviet governance model. Even more  notable is the stubbornness of the legacies   Georgia’s shadow economy created. These legacies  have clearly affected crucial developments   since Georgia’s independence, and remain key  challenges in Georgian politics to this day.

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2023-11-23 00:11

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