Armenia

By Nessuna

On Friday, May 5, I had the pleasure to be present at a lecture entitled “Globalization and Transition to Market and Democracy: The Lessons from Polish Experience.” The lecture lasted two hours longer than scheduled, and it was probably one of the most interesting and informative lectures I have been to.

The lecturer was “a key architect of Polish reforms”, who used to hold the position of the Deputy Premier and Minister of Finance in Poland in 1994-97 and 2002-03 who now works as the Director of TIGER as well as being a professor at the Leon Kozminski Academy of Entrepreneurship and Management in Warsaw.

He is also the author of 35 books and over 300 articles and research papers that are published in 23 languages around the globe.

According to his biography, the UN, IMF and the WB “have sought his expertise” and “he has accepted invitations for visiting professorships at Yale, UCLA and the University of Rochester, New York.” On top of that all he is “a marathon runner and world traveler who has explored over 120 countries.”

I was surprised to know that even though Professor Grzegorz W. Kołodko had only a few days in Armenia he managed to balance his meetings and lectures with traveling outside of Yerevan. Apparently, he even paid a visit to Tatev monastery, 20 km to the south-west of Goris, which was unfortunately covered in fog.

One can find many of Professor Grzegorz W. Kołodko’s publications online, and that is why I will highlight only some of the key points made during his lecture.

It is believed that Poland has handled the challenges of 15 years of transformation better than other economies. Professor Kołodko disagreed with the term “shock therapy” used with regards to the Polish experience because “it is misleading.” Poland did not undergo shock therapy, but it was rather “shock without therapy” at the beginning and then “therapy without shocks” later.

One of the reasons behind Poland’s “economic miracle” is that it has not only managed to have the “dynamics of growth,” but also to properly distribute “its fruits.” Of course, it isn’t a secret that geopolitical position is also very important. Poland has the most favorable geopolitical position, as opposed to Armenia which has “the most awkward one” in the region. However, and while there is more than a grain of truth that geopolitical position matters, so does policy.

At the same time, the soundness of policy does not depend on institution building alone. It depends on other factors such as economic doctrine or the skills of policy-makers.

Here is an interesting fact for you. According to some American survey, when asked “Do you believe in Hell?” and “Do you believe in Heaven?” more people answered “yes” to the second question. We soon believe what we desire. Yet, how can one believe in the existence of Heaven while denying the existence of Hell? If there is right, then there is wrong — one cannot exist without another.

Yet, there is no Hell and no Heaven, it is the same place. This is to say that “the flow of capital,” for example, can turn into a good or bad experience depending on the policy the government pursues. Yet no policy maker will ever say they are doing badly because they were wrong. Policy-making is indeed more art than science, and somewhere where one has to combine so many things at the same time.

In fact, the point that Professor Grzegorz W. KoÅ‚odko’s emphasized many times during the lecture was that “things happen the way they do because many things are happening at the same time.”

One lesson that Armenia can learn from Poland is that “the main source of development is domestic capital accumulation.” Foreign capital cannot be a substitute for national savings. In other words, having foreigners investing in Armenia is good, but it is much more important to create the necessary conditions for domestic capital accumulation. Tourism is one sector of the economy that Armenia can benefit from. However it requires proper infrastructure, knowledge and management.

Much attention is paid to the question whether democracy facilitates economic growth or not, and while it is generally believed that the answer is “yes”, it was pointed out that this also depends on the decision-making processes that take place. Thus, sometimes enlighted dictatorship works much better in terms of achieving economic growth that democracy can. China is a perfect example of this. However, the question one should ask is do we want economic growth at the expense of democracy?

Quoting Professor Kolodko, “democracy is a value per se, disregarding economic growth.” Interestingly, he also said that in Poland, the market economy works better than democracy.

Speaking of globalization, it was mentioned that this is the only logical path of development, whether we like it or not. It is not always fair, and there are losers and winners, but it is nevertheless “the end of history” as we know it. We can try to impose tariffs, or dismantle McDonalds stores as French farmer Jose Bove did, but the process of globalization is irreversible.

When asked about Armenia and neighboring countries, Professor Kolodko replied that ideally, Armenia should strengthen its ties with Turkey and Azerbaijan, engage in trade, open its market, and integrate to the fullest. However, because of historical and political connotations, this option is not foreseeable in the near future.

At the end of the lecture, Professor Kolodko, promised to visit Armenia again, provided there won’t be any fog in Goris.

This entry was posted on Sunday, May 7th, 2006 at 6:59 am and is filed under Blogging, Europe, Economy, Caucasus, Democracy, Armenia. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.