Armenia’s unfinished revolution

25 May by Armen Abagyan


Nikol Pashinyan 13 April 2018 (CC - Wikimedia)

Bells of triumph are ringing in the streets of Yerevan following the deposition of now-former Prime Minister Serzh Sargsyan. Ding-dong, the wicked witch is dead. The spectre of totalitarian rule and unbridled corruption enervating the already impoverished Armenian people is no more. Such is the widely-disseminated narrative pushed both domestically and internationally.

Mass civil disobedience and the rise of Nikol Pashinyan

The popular mobilization under the leadership of Nikol Pashinyan, Armenia’s white knight of the “Velvet Revolution of love and reconciliation,” was certainly remarkable. Widespread discontent amongst large swaths of Armenia’s disaffected population led to mass demonstrations of civil disobedience across the country. Tens of thousands flooded city centers contesting the economic inequality, nepotism, and flagrant corruption under the Republican Party’s immutable stranglehold on the small landlocked post-Soviet republic of nearly 3 million. Sargsyan’s brazen attempt to extend his rule beyond the term limits of his presidency, after nearly a decade in power through a dubious constitutional referendum, was the last straw for Armenians already weary from years of thievery from the entrenched oligarchical ruling class. After weeks of street protests, road blockages, and labor strikes, Sargsyan capitulated to popular demands and resigned on April 23rd. On May 8th, Nikol Pashinyan was elected the 16th Prime Minister of Armenia.

The prevailing discourse on the bloodless revolution in Armenia, like with that of many civil uprisings in the former Eastern Bloc, is the insistence that systemic corruption, authoritarianism, and nontransparent governance are at the heart of Armenia’s woes. If only Armenia were to adopt a western styled “liberal” democracy, with transparent well-functioning institutions and free and fair elections, she’d be well on the course to economic development and prosperity.

Framing the dynamic antigovernment grassroots movement simply as a demand for democracy conveniently fits within the neoliberal paradigm where “freedom,” with respect to the social and political spheres, is equated to free market fundamentalism. While Pashinyan’s intrepid declarations to bring democratic reforms, root out corruption, and to dismantle oligarchical monopolies appear noble in rhetoric, they fail to address the real underpinnings of Armenia’s misery: unfettered capitalism.


Implementing free market fundamentalism

Following the break-up of the U.S.S.R., the U.S. Treasury Department, the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

, and the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
descended upon the post-Soviet governments imposing harsh economic Shock Therapy programs to liberalize, privatize and deregulate the once centralized economies. The unchallenged dogma that the former socialist countries would embark on a “transition” process in which neo-liberal, free-market economic and political models would reign supreme has rendered Armenia a tabula rasa ripe for capitalist plunder.

Factories were brimming with activity during the Soviet era. Once a hub for scientific research and innovation with a sophisticated tech industry, Soviet Armenia boasted a modern industrial sector, exporting machine tools, textiles and other manufactured goods to sister republics in exchange for energy and raw materials. The dissolution of the Soviet Union, and the central planning system, would put Armenia on the path to economic ruin.

Faced with the abrupt collapse of local industry, a rapidly contracting economy, an energy blockade, and war with neighboring Azerbaijan, in 1994 the government was strong-armed into a zealous IMF-sponsored “Structural Adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/
” program in exchange for badly-needed financial aid. Capitalism became the lay of the land; the state and its institutions were mercilessly disassembled and the “free market” took their place, all at the behest of international financial organizations.

In today’s Armenia, as is the case with fellow countries of the Commonwealth of Independent States, welfare is virtually non-existent. As part of Armenia’s integration into the global capitalist order, the IMF and the World Bank has imposed radical austerity measures since independence. Public expenditure on health, social security, and education have been routinely slashed, all in the name of state budget “optimization”, reduction of balance of payments Balance of payments A country’s balance of current payments is the result of its commercial transactions (i.e. imported and exported goods and services) and its financial exchanges with foreign countries. The balance of payments is a measure of the financial position of a country vis-à-vis the rest of the world. A country with a surplus in its current payments is a lending country for the rest of the world. On the other hand, if a country’s balance is in the red, that country will have to turn to the international lenders to meet its funding needs. deficits, and macroeconomic stability. On the other hand, private enterprises have been afforded generous tax breaks and incentives, ultimately depriving the state of indispensible tax revenues for social services.

Overcrowded and underfunded public hospitals delivering substandard (while somewhat affordable) medical care are becoming scarcer in the face of endless health sector privatizations. Recently, ten large hospitals have been set to be sold off to investors, which will cater almost exclusively to Armenia’s elite class with the means to pay for private care. Quality education too is reserved only for the rich, which is a far cry from Armenia’s high performing public universities during the Soviet era. Social housing similarly remains only a distant memory of the Soviet past, and even the postal service has gone up for sale. In 2010, legislation was introduced to privatize social security in adopting an extreme version of a private pension model where 100% of pensions are entrusted to the ever-volatile financial markets. One can only laugh at the dark and perverse logic of implementing such a policy almost immediately following the 2008 financial crisis. Although guaranteeing some semblance of a welfare state still appears permissible in some “developed” countries despite the strong offensive of Capital led against Labor in the past few decades, Armenia, and peripheral states more generally, are rarely afforded such a luxury.

The “fire sale” privatizations of the 1990s saw factories, equipment, infrastructure, and natural resources sold for pennies on the dollar to opportunistic oligarchs and foreign firms. Over 80% of agricultural land and 90% of Armenia’s telecommunication system have been handed over the private sector. To finance Armenia’s extensive debt to Russia, the government engaged in the infamous IMF-sanctioned “equity Equity The capital put into an enterprise by the shareholders. Not to be confused with ’hard capital’ or ’unsecured debt’. for debt” swap, where its electricity network, largest cement factory, thermal power plant, and three research and production enterprises were sold off to Russian enterprises. Thanks to the 1998 World Bank “Municipal Development Project,” about two thirds of the Armenian population now receive their drinking water from private French and German companies. The list goes on and on. Such insidious economic colonialism with regards to Armenia’s public resources, which should be guaranteed to all as a fundamental human right, leaves Armenians vulnerable to abusive tariff hikes in a country where almost a third of the population lives below the official poverty line.


Plundering natural resources: the lucrative business of local and international capital

Armenia’s precious minerals have also been routinely privatized since independence, all of course in conformity with conditionalities tied to IMF and World Bank loans. Under the guise of promoting mining as a viable strategy for economic growth and poverty reduction, Armenia’s riches are subject to transnational extraction and pillage. The government in 2012 adopted “mining friendly” policies in its legislative framework through extensive “cooperation” with World Bank and European “experts”, all purported to attract foreign business and bring much needed jobs into the country. Not only has Armenia abolished exploitation fees for its natural resources, international mining firms are now only responsible for paying meager royalties valued at a maximum of .8% of mineral sales. The term “waste” has been dropped from Armenia’s Mining Code, rendering hazardous waste produced by foreign firms exempt from taxation. Even more appalling is the legislation that absolves polluting firms of all responsibility for cleaning up after mining operations have ceased.

Such policies have further weakened the state’s capacity to regulate mining activity, decreased any potential state revenues that could be otherwise reinvested in welfare services, and have had deleterious effects on the environment – destroying arable land and polluting Armenia’s water supplies. Colluding with local oligarchs, international mining companies get unhindered access to Armenia’s mineral wealth and secure contracts worth billions whereas the rural population is burdened with odious ecological debt.

Of course mining treaties such as the Aarhus Convention with the EU exist to combat unscrupulous behavior endemic to Armenia’s mining sector. Corruption and harmful environmental practices are only nominally addressed however, and nothing is done to guarantee that the government adheres to the provisions of the treaties it has signed. Given Armenia’s lenient regulations and mouth-watering profits for European mining companies, the EU has had little incentive to do so.

Exploitation licenses for 13 of the 25 metallic mines are owned by American, British, Canadian, Chinese, Russian, and German companies, and the remainder are owned by Armenian oligarchs. Pashinyan’s pledges to break the control over certain industries held by the oligarchical class to further open Armenia to foreign business would simply result in a transfer of the remainder of resources currently controlled by Armenia’s oligarchy to transnational corporations. Void of any economic sovereignty or state ownership of vital assets, revenues that should be sustaining a functioning welfare state instead flow into the coiffeurs of international businesses, all the while only employing 1% of Armenia’s working population.


Pashinyan’s delusive alternative

Pashinyan has bowed down to Russian pressure and chosen for the time being to remain in the Eurasian Economic Union (the most advanced project of “economic integration” within the CIS, gathering five member states: Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia), and the “people’s Prime minister” remains keen on perpetuating the sort of corporate imperialism that has provided little material benefit to the populace.

The Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU, of which Pashinyan was a strong advocate leading up to his ascension to power, has had disastrous effects for the “transition economies” of Ukraine and Georgia. Wages continue to stagnate, few new industries are being created, and tariff abolition has resulted in the destruction of small business sectors that are vital as they employ an overwhelming majority of the population. While the working class in Ukraine and Georgia have lost out on the illustrious trade deals with the EU, multi-national corporations have been raking in the profits.

Armenia already proudly boasts a Generalized Scheme of Preferences (GSP+) regime with the EU, where customs and tariffs are reduced or eliminated for Armenian exports to the EU in certain sectors. Unsurprisingly, one such lucrative sector is mining; and tariffs on aluminum foil and ferrous alloys exports have been abolished leaving the door wide open for European firms to come and extract Armenia’s natural resources as income inequality and unemployment persist. As evidenced by the numerous trade liberalization schemes already implemented with the EU as well as with other countries, it is not solely the entrenched oligarchy that have impoverished the Armenian people, but also the very “foreign business” Pashinyan wishes to attract to Armenia.

There is little revolutionary in what Pashinyan offers as an alternative to the despotism of the Sargsyan regime. While eradicating corruption from the ranks of Armenia’s government is certainly vital, corruption itself is only a symptom of the unjust economic and political system forced undemocratically upon the Armenian people. More foreign direct investment and trade agreements that by design favor the interests of corporate monoliths abroad will not bring an end to abject poverty and pervasive unemployment in Armenia. If the anti-establishment revolutionary were truly intent on bringing real change to his country, he would fight to reverse the neoliberal onslaught of the past three decades. He would fight the global development and financial organizations that have held Armenians hostage with abusive capitalist “reforms”. He would fight the profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. -driven multi-nationals and the ubiquitous privatizations that have rendered basic services unaffordable. Such critique is generally absent from the public discourse, and is non-existent in Pashinyan’s revolution. While we should not be overly nostalgic of Armenia’s Soviet past, marked by totalitarian repression and heinous crimes committed under Stalinism, there needs to be an alternative to the extreme neoliberalism that has run rampant in Armenia’s post-socialist era.

Pashinyan has already appeared to make good on some of his promises. On the 21st of May he announced a purge of all governors tied to criminal activity, and more recently launched an investigation into violations of Armenian law and environmental regulations by mining companies. These are, without question, positive developments. But when such initiatives don’t call into question the economic colonialism of Armenia’s state assets by foreign firms facilitated by various disadvantageous trade agreements and IMF and World Bank “partnerships”, they only scratch the surface.

The historic grass roots movement should not stay confined to a myopic witch-hunt to cleanse Armenia’s institutions of corrupted oligarchs, nor should we be satisfied with superficial democratic reforms. The vitality of Armenia’s civil unrest must be channeled into a struggle for liberation from the shackles of capitalism.



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