On the Issue of Third Modernization

President Nazarbaev’s message to Kazakhstani people with a call for third wave of modernization made the activist part of society ask an age-old question: will the Akorda and the ruling elite be able to provide grounds for the development of economy based on non-raw materials, under present conditions?

My opinion – the won’t be able to. I will explain why.

First of all, if they could, they would’ve done it a long time ago. As we remember, after a difficult first decade, Kazakhstan has stepped into the prosperous years, following a hike in prices of hydrocarbon and other raw materials. To be fair, things are still looking good today. Add to this foreign investments, considerable resources that have accumulated in the national fund and all of the unchecked government power.

Secondly, objective factors, that are obstacles to the development of the non-commodity sector of the economy, automatically devaluate any government initiatives making them very vulnerable. If only for the sole reason, that they don’t have a final owner, invested in completing them with success, while the government agencies have too much bureaucracy.

Thirdly, the business in our country is subordinate to the government apparatus. Under conditions, when the corruption comes from the top and is not only a source of shadow income, but also a political instrument, with which Nazarbaev secures loyalty of the ruling elite, entrepreneurs have no other choice than to be a herd of sheep being skinned; without being able to determine the fee, they reserve to living in the present.

Next, the government economic policy, including investment policy, is formed, as a collection of separate projects, rather than one holistic program, aimed at achieving a concrete result, adapted to concrete social-economic conditions and uniting  interested and participating groups on the basis of recognizing and fulfilling their economic interests.

Another reason is that the country has a weak but still existing governmental economic policy, but doesn’t have a national economic policy. The latter is different from the former in its scope and includes, aside from governmental investments, initiatives and projects, various private ones. A proof of that is the fact that we don’t even have a platform for the government and private sector to simply negotiate let alone cooperate.

Of course, there are other reasons, but even those are enough to understand: whatever mountains of gold they might promise us and however hard the prime minister and members of the cabinet beat their chest, it is all just an appearance of hard work. And unfortunately there are no chances of positive changes. Why, you ask? Let’s try to answer that question.

Let us start with elbasy. He is an old-school politician, who remembers how the modernization and development of the Soviet economy unfolded. Moreover, he was the secretary of Karaganda regional party committee and a secretary of the CCCP of Kazakhstan on industry. Then he headed the committee of ministers of Kazakh SSR for a long time, mostly during the era of stagnation.

But the uniqueness of Soviet economy was in its closeness and self-reliance, and thus, during its developmental stage, ruling institutions, such as CCCP of Soviet Union, council of ministers, military-industrial comission and state planning comitee, placed an emphasis on natural indicators, such as number of tons, units, packages, etc. rather than on price, net price or profit. While these indicators were included and calculated, they were secondary, since the government could largely control them through monopoly on foreign trade, direct establishment of prices and tariffs and direct distribution of material, labor and financial resources.

As a result, despite getting a Ph.D. in economics, Nazarbaev cannot truly be considered one. Moreover, he hasn’t personally established a single business venture in his lifetime, and thus concepts of free market, competition, market price, formation of net value and others, remain unclear to him. It is almost as if he is above them. In addition, considering his age and receptivity to adulation, he became a master in opening new enterprises, but not in determining their viability. Of course, everyone understands that the chances of elbasy waking up are zero percent.

Moving on. Any more or less large-scale business project in our country is usually organized and sponsored by the government or a quasi-government company. Less often, they are organized by private entrepreneurs, but with the blessing from an appropriate governmental body. However, there is a trap here that cannot be avoided due to all-around corruption, low level of professionalism of government apparatus, moral decay of government workers and overall unaccountability of all levels of government, going all the way up to the president.

The trap consists of the fact that officials and/or clerks of quasi-government companies are personally interested, not in the project making money and bringing profits for investors (in this case for government and private sector), but in enriching themselves. There is no need to explain, how it is done in our country. As a result, only a big investor with access to the top of Akorda, can escape the corruption at the top level, but even they are not immune to low-level corruption.

This means that a multitude of people, who decide the fate of a business project, the format, financing, oversight and quality assurance are primarily interested in hitting the jackpot. They could care less about what happens afterward. As a result, we get incidents like “Besoby”. Moreover, the collapsed and demolished buildings could be considered a lucky turn of events. Only if we end up with an exploded atomic reactor or a chemical plant, will we be able to realize that we are in great risk.

In conclusion, the last point is this. Since, business in our country is secondary in relation to bureaucratic apparatus and serves as its source for shadow income and money laundering, all of governmental structure, from president Nazarabev to the last akim, is trying to keep it under their control. And even more so, any public funds that go into its support and development.

As a result, governmental economic policy is inevitably formed as a list of goals of various government bodies and quasi-governmental firms. On top of that, the list itself is substandard, since nobody cared enough to try to form a sensible program out of it that after its conclusion will be able to successfully compete as a system at the free market and bring consistent profits. As a result, all of government’s actions can be compared to those of a person who lost their wallet in the dark and is searching for it under a streetlight, since it is the only place that is lit up.

It comes as no surprise then, that all of government’s developmental programs, especially in the last decades, inevitably fail, and Akorda in order to hide it has to continue pushing off the proverbial horizon from 2030 to 2050, beyond which Kazakhstanis are promised an all-around prosperity.


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