On Nazarbayev’s Pyrrhic Victory and the State Policy Failure

In the first article of the series, we argued that preserving the current state policy would lead to a collapse of Nazarbayev’s political system. It will happen because the very foundation of the existing system lies in a tacit agreement between the ruling elite and the Kazakh citizens.

Based on this agreement, the ruling elite promises to maintain an acceptable level and quality of life for the Kazakh citizens. The Kazakh citizens, in their turn, agree to put up with the elite’s practices. However, presently, Akorda is failing to honor its side of the bargain. So, the Kazakhstanis either seek to rebel (so far, mostly in the social media) or estrange themselves from the political, economic, social, cultural life of the country.

This estrangement is happening rapidly and on a massive scale. The last events such as the land reform protests and the society’s negative reaction to tightening the migration regime in the country clearly point to it. Consider, from the bureaucratic point of view, the changes in the regulatory framework initiated by the government are of little consequence. However, they are now at the focus of this social anger.  This means that the Kazakh citizens simple use them as an excuse to express their political disaffection.

However, only a small part of the Kazakh society acts in this manner. Most people simply withdraw into their own shells. They estrange themselves from the country, the state, the political system, the society. Anything beyond the narrow world of their family, work, friends becomes irrelevant and unimportant.  In other words, Akorda has achieved absolute victory in its long-time effort to depoliticize the Kazakh society and strip the democratic opposition of citizens’ support. This, however, is a Pyrrhic victory for Nazarbayev, because, at the same time, the citizens are losing their sense of belonging and solidarity with the country.

Note the USSR was going through the same changes in the 1980s when, against the background of the official Socialism success reports, the real level of the Soviet people’s lives had constantly been declining. There is no need to remind how it all ended – as soon as the state used up all the possibilities to maintain the status-quo, the state apparatus started to weaken rapidly and the ruling elite was forced to seek new ways to survive. Consequently, the political system collapsed completely in a matter of days.

Kazakhstan will endure the same if the current state polity continues to be the way it is. Since Nazarbayev himself formulates it as “economy first, politics second”, let us start with the former.

It is evident that the state economic policy has failed completely. Akorda’s efforts to kick start the economy, to improve it by once again legalizing the assets, by starting a new privatization of the state and the quasi-state property, by recruiting foreign (particularly Chinese) investors are falling flat.

This is happening because the Kazakh economy is a non-competitive one. Therefore, for the citizens who legalize their money, there is no point to invest it inside the country. New private owners of the state property will face the same problems as before, and they will not have any direct or indirect support from the government. And foreign investors want to make, not to lose, their money.

In these conditions, Akorda finds itself in urgent need of the drivers that will kick start the economy in general, not just some of its sectors. In fact, during the years of independence, four such sectors had been formed.

  • a massive scale business activity of the population during the first post-Soviet years when everyone in the country was trying to start a business;
  • the increase of world oil prices. Accompanied by multi-billion investments in the country, it secured pumping up the state budget and the National Fund;
  • the non-oil foreign investments that came to the country through the bank system;
  • the increase of consumer demand caused by the dramatic income growth in Kazakhstan.

Today, all these drivers are dead.

The massive scale business activity in Kazakhstan died sometime at the end of the 1990s when the people had realized doing business was not for everyone.

The high oil price driver died in the recent years when it became evident that, even with the production regulation, the return of the $80-100 per barrel epoch was highly unlikely.

The non-oil money driver died in 2008.

The consumer demand increase driver died after the economic crisis had begun and especially after the last national currency devaluation took place.

In these conditions, the current social policy is now directed towards preventing a dramatic decline in the social well-being of the large groups of people in Kazakhstan and not to solving the social problems. The home policy in general now aims at preventing the uncontrolled political activity.

Consequently, Nazarbayev and the ruling elite have found themselves in a catch-22 situation. They are unable to attempt anything drastic because they do not have the necessary resources and their hands are tied. Let us explain to you why it is so.

First, consider the non-oil investments. On the one hand, the country has the National Fund with more than $60 billion in it. However, Akorda cannot use these resources to stimulate the economy because it does not have a working range of tools for it. History tells us that, as a minimum, this money is used ineffectively or, as a maximum, simply get stolen. Never mind where it comes from, the budget, the quasi-state holdings, or banks.

Foreign providers of financing could become another source of non-oil investments. Today, however, we see only one such source – China. Still, if the Chinese money would come to Kazakhstan on a massive scale on the conditions standard for this type of investors, the anti-Chinese sentiments and the anti-government protests would unavoidably rise.  We doubt that Nursultan Nazarbayev, with his sensitivity to political risks, would have the courage to do it. And if he would, it could ignite some serious problems inside the country.

As for the massive growth of consumer demand, first, we must increase the level of employment and wages, reduce inflation, prevent a new national currency devaluation. There is no need to explain that the current government cannot solve these tasks not because it does not want to but because it is unable to. To solve these tasks, we need the nationwide endeavors, what is more, these endeavors must be systematic and long-term oriented. We could even say they must be sacrificial but who in Kazakhstan would make sacrifices on the altar of the country today?

The massive scale business activity, too, cannot happen at present. Moreover, we will not see a significant rise of activity even among entrepreneurs for reasons that are obvious to everyone and, under the practices of the ruling elite, cannot, in fact, be eliminated.

Therefore, Nazarbayev and his government must either wait for foreigners to start investing in the oil sector or hope for a miracle while pulling the wool over their citizens’ eyes and hiding their impotence behind empty words and promises.

* First article of the series: At the Culp of Transition. The Power Shift Scenarios.


Add comment

Your e-mail will not be published. Required fields are marked with *