The Political Economy of the Belarusian Crisis
- PDF / 88,768 Bytes
- 2 Pages / 595.276 x 785.197 pts Page_size
- 39 Downloads / 196 Views
DOI: 10.1007/s10272-020-0913-1
The Political Economy of the Belarusian Crisis Adam Przeworski famously wrote that “authoritarian equilibrium rests … on lies, fear, or economic prosperity.”1 Belarusian dictator Alexander Lukashenko has felt safe for his first twenty years in office primarily due to a strong economic performance. At the time of the previous presidential election in 2015, Belarusian GDP per capita (in purchasing power parity adjusted terms) was almost three times as high as in 1994 – the year when he came to power. On average, in 1994-2014, per capita incomes have been growing at a healthy 5.5% annually. The catch, of course, was that this growth was due to massive subsidies from Russia: 10%-20% of GDP per year, by International Monetary Fund (IMF) estimates. Once the Russian economy went into a recession followed by prolonged stagnation due to a decline in oil prices and Western sanctions, Belarusian economic growth also ran out of steam. Russia went through a major austerity exercise at home and could not afford to be as generous to friendly authoritarian regimes as before. As a result, Belarusian GDP per capita stopped growing: its average annual growth rate in 2014-2019 was precisely zero. Given the bankruptcy of Lukashenko’s growth model, it is not surprising that he lost the 2020 election and resorted to violence and lies (for the latter he even had to import two planeloads of Russian TV propagandists). It is difficult at present to predict the outcome of his fight against Belarusian society. However, it is useful to discuss the structure of the Belarusian economy as this helps understand the country’s political economy and thus inform Europe’s strategy regarding Belarus. First and foremost, the Belarusian economy is dominated by state-owned enterprises (SOEs) and state-owned banks. Despite many promises to both Russia and the West, Lukashenko has eschewed privatisation, so the share of the state in the Belarusian economy (and especially in its industry) is much higher than even in China. According to various estimates, SOEs account for half the GDP and almost 60% of employment. Some Belarusian SOEs are profitable but most are not and therefore rely on subsidised inputs from Russia or bailouts by state-owned banks. Much of the SOEs’ debt to the banks or the markets will have to be assumed by the government or restructured, which in turn will mean that the banks will have to be bailed out by the government. However, the government’s own debt is already growing quickly and further market borrowing is costly: Belarusian eurobonds trade at 7% per year in dollar terms. The SOE subsidies are not only a fiscal problem; they also limit the chances of restarting economic growth. As SOEs depend on subsidies and bailouts, they have no incentive to restructure and invest efficiently and their productivity stagnates. While SOEs dominate the commanding heights of the Belarusian economy, there is also a private sector – mostly small and medium-sized enterprises (SME). The private firms face an unfair competitive envi
Data Loading...
