How To Reduce Corruption — And Lose an Election

Imagine it’s 2003, and you’ve just been elected the president of a failed state. Its name is Georgia, a little wedge of forest nestled between the Black Sea and the Caucasus Mountains. It has spent the last 900 years as a trinket passed back and forth between Russia, Turkey and Iran. If it ever comes up in conversation, which is rarely, people are likely to think you’re talking about the land of peachtrees and Ted Turner, not eggplants and Joseph Stalin.

Nevertheless, it’s 2003, and you’ve got a job to do. Your country has 4.5 million people, an unemployment rate of 50 percent, a median income of about $10 a month and, in its most fortunate cities and regions, two hours of electricity per day.

This was the situation Mikheil Saakashvili found himself in nine years ago. His country had declared independence from Russia in 1991, and the ensuing 12 years had been a countrywide game of Hungry Hungry Hippo. The police force was neither police nor a force, but a mobile fraternity of bribe-extractors. Politicians and civil servants performed the routine functions of governance—issuing licenses, allotting budgets, delivering services—with reluctance so severe the World Bank referred to them as ‘criminalized’. Getting a business license required approval from 29 government agencies. Who even knows how many bribes you had to pay.

Saakashvili studied at Columbia and George Washington University. He had a fellowship at the US State Department in the early ‘90s, and studied human rights in France. It’s sort of surprising he hasn’t given a Ted talk. He was pulled away, his political biography tells us, from a gig at a US law firm and general international awesomeness in 1995, and convinced to come back to his humble homeland, stand for elections and rescue his wedge of Caucasan forest from Russia, Turkey, international donors and, possibly, itself.

Tbilisi, the capital, from above.

Saakashvili got 95 percent of the vote in something called the Rose Revolution, something we all skimmed articles about in the New York Times in 2003 and then immediately began confusing for all the other ones (velvet, orange, etc) we mix up at pub quizzes.

As the spotlight of the world’s attention dimmed, Saakashvili began the impossible, invisible task of making a country work. The way he did this was by giving the entire country the Alec Baldwin speech from Glengarry Glen Ross:

First prize is, your salary goes up by a factor of 20. Second prize is, you get to keep your job. Third prize is, you’re fired.

First up: The cops. Overnight, he fired all 16,000 of them. He replaced them with applicants trained in community policing, crime reduction and citizen services. Salaries increased 23-fold between 2004 and 2011.

‘Wasn’t there a period when no one was policing the country at all?’ I asked my friend who works at an NGO here. ‘Wasn’t it just chaos in the streets?’
‘You’re assuming there was policing going on at all,’ he said. ‘Georgia was basically Somalia in 2003. Crime went down after all the cops were fired.’

It didn’t stop there. Police officers were given new uniforms, glass-fronted police stations (transparent, get it?) and—without their knowledge—squad cars equipped with listening devices. The first cops found to be taking bribes, plotting against their superiors or otherwise fucking with their new mandate to protect and serve were accused of such on national television, and sent to prison for up to 10 years. No, seriously, these measures said, we mean this.

One of Georgia’s new police stations.

Next, politicians and civil servants. Saakashvili made sure every single one got the same message: I don’t care what you did yesterday, I don’t care what you do today, But starting tomorrow, you’re going to hep this country run smoothly, or you’re gone.

He fired 40,000 of them the first year. The rest were watched by cameras, tracked by spreadsheets and evaluated by superiors and customers alike. The better services worked, the more he raised their salaries.

Tbilisi’s Public Service Hall

And finally, everybody else. In 2003, tax revenue was only 12 percent of GDP (in the US, it’s 24 percent. In the UK, 39 percent.). Most retailers kept ‘official’ and ‘actual’ books to avoid reporting income.

The first thing Saakashvili did was ban informal vendors—those dudes who sell fruit while you wait at red lights, for example—from city streets. This is too harsh, they protested. Fine, came his response, but at least it’s consistent.

For the formal vendors—corner stores, restaurants, hair salons—It was Alec Baldwin again: You’re all going to install special cash registers that tell the government, in real time, what you’re selling and what you’re earning. If you don’t like it, you don’t stay in business. Oh, and you have to buy the cash registers yourselves. That’s too onerous, they protested. Fine, came his response, but it’s not unfair.

Within months, everything bought and sold was now tracked and reported. The new, policing-focused police force sent undercover officers to stores all over the country to check if vendors were using the cash registers. Saakashvili also worked on the demand side. The special cash registers spit out receipts that had built-in lottery tickets. Each had a barcode that, for a lucky few, could be redeemed for cash. All of a sudden, ‘where’s my receipt?’ became as common in Georgia as ‘have a nice day’ was in America.

Georgian receipt with ‘lottery barcode’

Next, he went after the bigwigs. For months after he came to power, the news was animated with raids on Georgia’s biggest businessmen, mafia, oligarchs and political fixers. He gave them all the same deal:  You’ve got two options: Go to jail for all the warlord-ass shit you’ve pulled over the last decade, or pay restitution and get a full amnesty. The restitution for some of them was as much as $14 million. There was no special receipt.

The bigwigs didn’t even protest. They knew the response before it came.

At the same time he made everyone pay their taxes, he made sure everyone knew what they owed. He threw out most of the old tax code and installed a flat tax: 12 percent on your income, 20 percent sales tax and 10 percent on any interest you earn. The rates were crazy-low, but everyone was paying them. Tax revenue went from $300 million to $3 billion between 2003 and 2008.

These reforms built a fence and fertilized the soil. All Saakashvili needed now was for the private sector to come and plant the seeds. And came they did: Between 2003 and 2007, foreign direct investment in Georgia rose from $330 million to $1.7 billion. In 2010, two years after the financial crisis, it was $810 million. Two new oil pipelines link Georgia with Asia and Europe. I hear the lines at Carrefour on Saturdays are brutal.

Meanwhile, Georgia’s rank on the Economic Freedom Index went from 93rd in 2005 to 34th in 2012. The World Bank says Georgia is the 16th easiest country in which to do business.

There was other stuff too. The education system got pegged to a nationwide standardized test, ending its reliance on the former ‘pay your teachers for grades’ model. Healthcare was privatized (I know, I know), which reduced corruption among doctors. Border guards and customs agents got their own version of the ‘you’re all fired; the new guys get new uniforms!’ program.The government posts all of its tenders and procurement contracts online.

Georgia doesn’t require a visa for most foreigners to work or start a business. Georgia doesn’t want your tired, your poor. It wants your rich and energetic.

Nine years ago, Georgia was basically Deadwood on the Black Sea. Nowadays it’s not exactly Blade Runner, but it’s not Mad Max either. The lights are on, trains and buses work, construction cranes provide shade for clinking outdoor cafes. Nearly 80 percent of the population reports that they’ve personally experienced a drop in corruption. Violent crime was cut in half, and the homicide rate is the same as the United States. Per capita GDP is $5,400. OK, that’s the same as Angola, but when you consider that a decade ago it was $400, you have to give a little whistle.

Georgia’s remaining challenges include updating its infrastructure

Last Monday, Saakashvili was voted out. If it all goes smoothly from here (Saakashvili has to voluntarily hand over power to the James Bond villain who defeated him, a mysterious billionaire named Bidzina Ivanishvili), it will be Georgia’s first democratic transition.

Saakashvili’s zeal for reform, for tearing down existing structures and installing new ones, left some holes in the plaster that he filled with his own power. Saakashvili’s towering achievement is that the state is no longer a vehicle for politicians, civil servants and police officers to enrich themselves. The problem is, it may have become a vehicle for Saakashvili’s party, the United National Movement, to do so instead.

Crackdowns on journalists, political firings, restriction of free speech, and various backroom sketchiness have increased in recent years, and some of the post-revolution reforms (restitution and amnesty for organized-crime lords, seriously?) have left a bad taste in people’s mouths.

There’s also the prison rape video.

Over the last decade, all those no-tolerance sentences for petty criminals, crooked cops and corrupt bureaucrats swelled Georgia’s incarceration rate to the 4th highest in the world, above even Russia. In September, a video hit the news showing prison guards sodomizing prisoners with broomsticks. The media went to the citizens, citizens went to the streets, politicians went to the media. Saaksashvili’s party got 40 percent of the vote. The opposition, 55 percent.

I want to use the cliché that Georgia is a shadow of its former self. But more accurately, its former self is a shadow that refuses to disappear. Everything Saakashvili has done is fragile. The minute you turn off those cop-car microphones, delete those civil servant spreadsheets, hide those procurement documents, the cost-benefit analysis goes back to where it was, and behavior will adjust to fit.

I don’t know if Saakashvili deserved to lose the election. In a world full of leaders who get elected promising to reduce corruption, he’s one of the only ones who actually did. Georgia, for better or for worse, is a country where someone demonstrably wanted the government to work better, and wasn’t afraid to slap a few hands reaching for the cookie jar.

Mikheil Saakashvili made his country work. He made citizens safer, government more effective and businesses more profitable. And then he paid the cost.

Imagine yourself in his shoes again, this time in 2012. As you look down from the hills above Tbilisi, maybe you’re thinking that in the end, nothing is free, not even the market.

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1 Comment

Filed under Essays, Pictures, Serious, Travel

One response to “How To Reduce Corruption — And Lose an Election

  1. I can’t explain why (it began with some techno soundtrack English travel show) but I’ve long had a dream to visit Georgia. No one ever tried to make it out to be Club Med and I’m certain I would starve if I stuck to my vegetarian guns but somewhere between the grizzled veterans of poverty and its place as the crossroads of continents a homing beacon has been waiting for my arrival.

    Thanks for writing this.

    I also can’t explain why I never bother reading up on a place that provides such superficial fascination. Once upon a time I did watch a documentary called Power Trip (http://www.imdb.com/title/tt0358647/) that makes the country all that more unappealing. I’d recommend it if they make such things available in that one horse town you call home.

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