Towards Authoritarian Capitalism in Belarus?
Despite the dark clouds of political repressions Western businesses still express interest in doing business in Belarus. Recent evidence of that is an event in Minsk organized by the Ministry of Economics called “Belarus Capital Markets Day”. Apparently, Belarus authorities want to look serious with their privatization plans.
Deutsche Bank, London Stock Exchange and reputable advisory firms were among the sponsors of the event. The event’s purpose was to educate the largest Belarusian state-owned enterprises such as MAZ, Mozyr Oil Refinery and Belarusbank about international capital markets.
That practical event was preceded by a more theoretical one. Just a few days after the election day crackdown, deputy minister of economics opened an academic conference in Minsk hosted by the Belarusian Economic Research and Outreach Center (BEROC). BEROC is a Belarusian economics think tanks which tries to attract Belarusians working abroad and international scholars to share their knowledge. The initiative belongs to Aleh Tsyvinski and Mikhail Golosov, Yale University professors who left Belarus in their mid 20s to study in the United States.
It is fortunate that Belarus starts opening up, perhaps because of economic pressures from the East and West. But while being so focused on the economics side Belarus authorities often neglect the legal side. No matter how efficient their economic policies are, investors are unlikely to pay a fair price for Belarus property if legal instability will persist in the country.
In countries with established rule of law, it takes many months if not years for a law to be passed. In Belarus, it may take just one day for the President to sign a decree which can override any other law, not to mention a contract. Such decrees can completely change the applicable tax regime, or even expropriate assets of a particular company. Moreover, such decrees occasionally have retroactive effect. Such emergency law making may be good in wartime but not in times of stability. In addition, the Belarus courts do not have reputation of being particularly independent even in matters which are far from politics.
As a result, when serious investors are coming to the country, they have to price in these legal risks in addition to political risks. Therefore, Belarus authorities should not be surprised when foreign investors are ready to pay very modest amounts for Belarus assets. For many of them it just an interesting new lottery with a very uncertain win.
Legal stability, respect of private property and independence of courts does not necessarily come hand in hand with liberal democracy. According to the World Bank, Singapore for many years is the country with the most business-friendly environment. But at the same time political freedoms and human rights are very limited. The country’s regime is often dubbed as “Authoritarian Capitalism” but it still attracts one of the highest foreign direct investments per capita in the world.
Foreign investors have little doubt that Belarus is authoritarian, but convincing that there is capitalism will be a more difficult task.
Why Belarus is not Egypt
Many are wondering these days – why demonstrations in Belarus two months ago were not as massive in Egypt and have not led to political changes. Belarus is not Egypt in many important respects, but this does not necessarily mean that changes are impossible in Belarus.
The most obvious difference between Belarus and Egypt is that Belarusians have not yet fully formed as a nation – neither politically, nor culturally. Although there are two official languages, those who speak Belarusian are usually treated with hostility because this language is seen as a sign of a certain political position. A dominant religion is also absent – although nominally the majority are Russian Orthodox, as far as those actually practicing religion are concerned, the number of Catholics and Protestants is higher than those of Orthodox. The vast majority of Belarusians do not practice any religion at all.
More importantly, until the 1990-s Belarusians have never enjoyed a prolonged period of their own statehood, outside of control of foreign nations. That prevented them from cementing their own vision of history and their place in the world. Belarusians as nation are political teenagers who need time to grow and mature.
In addition, centuries of wars and foreign domination on Belarus territory have made their trick – people often prefer to be satisfied with the bare minimum. The official propaganda portrays an image of a happy Belarusian who only needs two things – a shot of vodka and a piece of pork on the table. Obviously, most Egyptians need neither vodka nor pork to be happy. To be absolutely fair, in the years after the collapse of the Soviet Union Belarusians have seen more freedom and prosperity than ever in their history. Even today there is much more freedom in Belarus than in the Soviet times.
The other reason why Belarus is not Egypt is that it is very difficult to organize people in a country with cold climate. Belarus is the world’s northenmost autocracy. Having such a political regime in the North is already an anomaly because countries in the North such as Sweden or Canada are usually exemplary democratic countries with very low political corruption. Perhaps Charles de Montesquie was right when he attributed national character to geography and climate. He observed that “you must flay a Muscovite alive to make him feel”. The same applies to Belarusians today. As northern people they are relatively insensitive to pleasure and pain which makes them different from Egyptians who live and protest in warm climate.
Not surprisingly, after Lukashenka was first elected in July 1994 he organized presidential elections in cold months. When it was relatively uncontroversial that he would win the second term, the elections were held in September 2001. The next elections were held in March 2006. In 2010, when it was clear that he was losing support of the population the elections were held at the end of December. Then the winter cold helped the regime more that its riot police.
Finally, Belarus is not Egypt because it remains heavily dependent upon Russia both economically and politically. Russia is comfortable with the status quo and will continue to facilitate alienation of Mr Lukashenka’s regime from the West. The Eastern neighbor is so influential in Belarus not only because of the language but also because Russian TV channels dominate Belarusian media landscape. The Belarus nation has not yet formed as such and therefore particularly vulnerable to outside media influences.
Belarusians obtained its independence nineteen years ago and soon the nation will no longer be a teenager. It is important to help Belarusians mature as a European nation by strengthening its national identity and language. The country’s dependance on Russian media can be reduced by offering alternative sources of information so that Belarusians can see the world through their own lenses. After all, it is not always cold in Belarus which makes the prospect of political changes more promising.