Comperative political economy of Post-Soviet Georgia: Varieties of Capitalism.
After the disintegration of the Soviet Union, the analytical dualism between capitalism and
socialism almost completely disappeared. Until this period more comparative institutional analysis
has been done between these two generalized types. This is not to say that there has been no study
of differences within capitalism, although in recent decades the West has been dominated by various
frameworks of comparative institutional analysis that examine differences within capitalism
(Amable, 2003);
Today, one of the most common analytical frameworks is "varieties of capitalism" (VOC),
which analyzes the comparative advantage of national economies based on the study of institutions
and institutional complementarities (Hall & Soskice, 2001). According to this theory, the
competitiveness of the national economy depends on the institutional responses to the problems of
collective action produced by transaction cost economics in the following areas: corporate
governance, relations between firms, industrial relations, management, employee-employer
relations, and vocational training/education/innovation. Under this framework, there are two
successful types of coordination, which in turn represent the types of capitalism. In the first,
coordination is more market-oriented (liberal market economies), while in the second, coordination
is based more on non-market, strategic relationships (coordinated market economy) .
Criticism of the classical approach of the VOC is carried out from many theoretical angles
(e.g., critique of methodological nationalism and functionalism), although the most productive
contribution, in this case, has been made by scholars who were oriented towards Visegrad and
central-eastern European countries. In parallel with the European integration of central-eastern
Europe and the former socialist countries, they noted that the classical theory of the VOC could not
explain the capitalist forms and institutional arrangements in those countries. One such approach
develops the concept of a "dependent market economy" in which the Visegrad countries are
considered primarily (Nölke & Vliegenthart, 2009).
The point is, the "VOC" focuses on national firms and studies national economies. This
significantly limits the scope of analysis in a globalized economy. For example, in Visegrad
economies, foreign direct investment is the dominant source of funding, while most large firms are
transnational corporations, which significantly determines coordination in other areas and develops
different institutional complementarities. In regions where the penetration of foreign capital is not
just high but also dominant, it is necessary to bring an international dimension to the institutional
analysis.
In this respect, the concept of "dependent market economies" differs from the classical
approach of the "VOC", which implicitly relies on ideal types and considers other systems in terms
of transition or deviation - a hybrid form. Unlike liberal transistology, according to this theory,
convergence is not necessary for the formation of dynamic capitalism, and "dependent market
economies" are just as complete formations as liberal and coordinated market economies. The
Visegrad countries experienced significant economic development using comparative advantages in
the assembly and production of relatively complex and durable consumer goods. "These comparative
advantages are based on institutional complementarities between skilled, but cheap, labor; the
transfer of technological innovations within transnational enterprises; and the provision of capital
through foreign direct investment"(Nölke & Vliegenthart, 2009).
Unlike classical (Latin America) "dependency theories", here "dependency" is not presented
as stagnation of the economy or as a complete subordination to other (core) economies. Local
businesses and the state have certain developmental goals, however, because the speed and direction
of capital accumulation are determined from the outside (Evans, 1979, p. 27), they can only achieve
"dependent development" (Cardoso, 1982). In economic sense, a “dependent” economy is defined
by the fact that the dynamic components required for capital accumulation and expansion are not
located within the national economic system (e.g., strong national innovation system, financial
resources, strong national firms) (Cardoso, 1982). for this reasons comperative advantage of visegrad
countries are are constantly being threatened by countries located further to the east and will
continue to remain limited to segments of their economies. Innovation always comes from outside,
embodied in products and processes designed elsewhere. Production in DME’s is “based always on
established methods and technologies so that these countries can never lead with the newest
(Myant,2018) ”. For this and other reasons, the growth of such countries is limited.
It is easy to see that Georgia is a dependent economy (although we do not have a consistent and
concise description of it yet), but we have not yet studied the degree of integration into world
markets, the level and quality of foreign capital penetration, the national innovation system, no
institutional complementarities in comperative perspective, etc. The theory of "dependent market
economy" maintains the empirical approach developed within the VOC, thus its practical
significance exceeds the classical theory of dependency theory. By combining dependency theory
and the VOC methodological framework, we can form a more complete picture of national
economies and provide an institutional analysis of them.
The use of current methodologies of comparative political economy is rare in the Georgian academic
space. Much of the institutional research conducted in Georgia is still locked in the ideological
discourse of the Cold War, in which the dichotomy between homogeneous market and socialist
economic systems dominates, and the country's current poverty is directly linked to incomplete
transformation into a market economy. This significantly limits the scientific analysis of the current
situation and the critical reflection on it. The homogeneous perception of capitalist countries gives
impetus to the understanding in which peripheral countries are considered in the transition to a
successful homogeneous market economy. This teleology excludes the existence of diversity within
capitalism and limits the area of practical action.
Georgia is and continues to be integrated into the world market economy, although this is not
followed by the accumulation of knowledge about these processes and the production of local
knowledge. Georgian scholars need to contribute to the current academic debate in Europe, in this
case in the field of comparative political economy. In the study, we will use the quantitative and
qualitative methods developed recently in comparative political economy to typify Georgian
capitalism, explain the nature of development and study perspectives.
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