Central Asia in the Globalization Process: Comparative Analysis of Human Development and Socio-Economic Situation

Transcription

1 7th Silk Road International Conference Challenges and Opportunities of Sustainable Economic Development in Eurasian Countries Central Asia in the Globalization Process: Comparative Analysis of Human Development and Socio-Economic Situation Fikret ELMA PhD, Department of Public Administration, Faculty of Economics and Administrative Sciences, Qafqaz University, AZERBAIJAN Sarvar GURBANOV PhD, Department of World Economy, Faculty of Economics and Administrative Sciences, Qafqaz University, AZERBAIJAN Abstract Twenty years have been left behind after the collapse of Soviet Union (SU) and independence of Central Asian Countries. Globalization accelerated worldwide in terms of socio-economic and political improvements and generated crucial outcomes. Neo-liberal approach has established positive perception about globalization; economic development will get better, poverty, unemployment and inequalities will be decreased. However, global financial crisis, increasing poverty and inequalities start to make this approach to lose its meaning. Furthermore, especially during last ten years socio-economic problems have deepened globally. Central Asian countries (Kazakhstan, Kyrgyzstan, Uzbekistan, Turkmenistan, Tajikistan) experienced grave phases such as disintegrating from SU, establishing a nation-state and transition from command to free market economy, had faced setbacks in terms of socio-economic issues during the early stages of independence ( ). Gradually in this geography socio-economic decline had slowed down and certain level of economic development had been achieved. Among these countries resource-rich countries Kazakhstan, Uzbekistan, Turkmenistan have better economic development potential relative to the Kyrgyzstan and Tajikistan. In this paper, Central Asian economies will be analyzed comparatively among themselves and with some other parts of the world in terms of main indicators such as socio-economic development, human development situation, income inequality, and poverty and unemployment rate. Keywords: Globalization, inequality, poverty, human development index, socio-economic development JEL Classification: O15 Introduction Globalization, especially in last 30 years with the collapse of the Soviet Union and combining with the worldwide socio-economic and political improvements has accelerated. Furthermore, this process has gained a comprehensive transformation volume affecting all nations. The point reached today, it is barely observed that this process generates important outcomes from the standpoints of social, economic, political and cultural aspects. Central Asian countries, during the accelerating globalization process, put differently, while there is a faster historical stream, gained their independence and they had been the part of international society. At this point, to establish a new state and nation building this based on the remnants of Soviet Union made them to experience pretty painful period. Today, Kazakhstan, Kyrgyzstan, Uzbekistan, Turkmenistan and Tajikistan have left the 20 years behind, which they gained during these challenging time period. During the first years of independence for the transition to the democracy and market economy, even though these countries faced to serious socio-economic and political problems, today, more or less and relatively, with the changing scale they have gained economic and political stability. In this context, Central Asian countries between 1991 and 1995 during the transition and restructuring period, had came across to economic downturn with the average negative % 9. Whereas, considering 2011 Human Development Index (HDI) report, (UNDP, 2012), Kazakhstan is in the group of high human development and other central Asian countries are in the group of medium human development in the HDI rankings. However, combining effects of new conditions which are the results of transition from socialist economy to the market economy and socio-economic effects of intensified globalization process, could affect Central Asian countries in different ranges. In this study, under the light of basic indicators during the globalization process Central Asian countries socio-economic development, human development situation, and income inequality and poverty issues will be analyzed comparatively. 1. Globalization and Socio-Economic Consequences Globalization, especially under the leading nature of economical, technological, and cultural components, has increased gradually mutual interdependence between world nations and countries. Nevertheless, today this interdependence besides with the regional and global scale integration movements also brought about decomposition and Page 271

2 CHAPTER IV, Globalization and New Economy Page 272 conflicts. Moreover, integration and mutual interdependence issues as it had been seen in the last financial crisis in the EU, not only generate positive outcomes, it brings more complicated approaches to the problems and during the remedy search generates some constraints. In the report of The Neighbor in Crisis: Greece of the Platform for Global Challenges this topic had been underlined. Up to the report (Platform for Global Challenges, 2012), EU integration movement, transforms Europe to the combined power, but at the same time, weakened the economic authority by supranational replacement. Euro, as a common currency and removal of custom obstacles on the borders, made the EU to move to the new dimension. To conclude, integration in EU constrain independence decision-making of member countries and national policies, because of these reasons, EU should make decisions on the multilateral level. Thereby in the report, the reactions to the crisis in the Greece and decisions made within the EU have been considered as the results of economic dependency and openness. On the other hand, first of all, today globalization phenomenon, is about the trade in more broad geography and eventually worldwide trade, put it differently, is the symbol of universal economic relations (Bulutoğlu, 2002: 330). By early 1980`s, globalization process accelerated and today it has triggered a brand new universal economic and international trade flow. A number of scholars (Wallerstein, 1998; Bulutoğlu, 2002: 331) conclude that, the point reached today and in this free market competition environment the economy had been established, it is kind of the economy which is based on worldwide production and distribution and it is the ultimate phase of liberalism. 20 years ago, Francis Fukuyama (Fukuyama, 2002), by considering the collapse of the Soviet Union, described this process end of the history and worldwide victory of liberalism. In this context, especially, during 1980`s and 1990`s prevalent neo-liberal approach came up with the conclusion that broadly speaking, globalization will generate positive outcomes for all the countries and will increase the economic development and welfare of nations. Whereas, in today`s world, especially with the global economic and financial crisis, increasing inequalities, poverty and unemployment have also gained global scale. As Joseph Stiglitz (Stiglitz, 2000) emphasized these negative developments is a core responsibility of central countries of capitalism, and global financial institutions such as IMF and World Bank. Ten years after the Asian Financial Crisis 1997, in 2008 financial crunch in USA have generated negative results which cover all around the world (Elma, 2008: 41). Moreover, as it happened in some European countries economic crisis brought about many grave consequences, which expands gradually. As it was stated in the Platform for Global Challenges report, economic crisis have deepened divergence within the European Union. Greece is the core source of problems of economic crisis in European Union, as it is seen in the Exhibit 1, public debt /GDP ratio during the 2009 have reached astronomic level. Exhibit 1: Greece Public Debt / GDP ratio for Source: Platform for Global Challenges, By 2010, this ratio was 145 %, and on January 2012 this ratio was % 160. During the process, at the same time, standard of living of nation has decreased rapidly, unemployment increased and %48 of the nation started to live under the poverty line (Platform for Global Challenges, 2012: 2). Maybe relative importance of the problems is smaller, but similar problems have taken place in Spain, Italy and other union countries. By the time, interesting result came from the Pew Research Center, which organized a poll about the confidence to the capitalism in the USA. There is an interesting comparison between 2010 and Exhibit 2: Little Change in Public s Response to Capitalism, Socialism According to the poll, in 2010, USA public have confidence on capitalism was %52, and %37 of the population

3 7th Silk Road International Conference Challenges and Opportunities of Sustainable Economic Development in Eurasian Countries did not have confidence on capitalism. In 2011, as its is seen from the Exhibit 2, these rates are relatively %50 and %40. USA has been considered as the centre of capitalism, because of this reason, these results are pretty interesting from the standpoint of globalization, capitalism and crisis triangle. Moreover, since the cold war era, for the decades, socialism opponency was quite prevalent in this country and right now, only %60 of the population has negative perception about socialism, %31 of American public is on the positive view side. It is pretty intriguing. In addition to this, recently, especially in capitalist centers such as London, Paris and New York, crisis and capitalism opponency outcries does also have deep considerable meaning from standpoint of the socio-economic consequences of globalization in the developed part of the world. Therefore, by considering the examples which is given above about the EU and USA, and especially increasing negative voices against the globalization in the third world, we can easily state that, prevalent neo-liberal approach about the globalization has been quite controversial. As it is known, economy represents only one dimension of globalization. Social, political and cultural dimensions of this process are also crucial. Consequently, around the globe, socio-economic realities and conditions that had been revealed by the globalization are in a very crucial conjuncture. Today`s world is exactly in a situation which laboratory means for the positive sciences. We can also conclude that, with the socio-economic, political and environmental aspects, there is an ongoing the global depression. So that, after the collapse of the Soviet Union, USA and EU as the centers of capitalism one after another experience economic and financial crisis and much more important and crucial point is that, nobody knows how to find out relevant remedies for these problems. All these developments take the pathway, which may justify the views of Immanuel Wallerstein. Wallerstein considers globalization as the capitalist world economic system and about 14 years ago contrary to the views of Fukuyama, he stated that, new era will bring collapse of liberalism by increasing rate and also will represent the time period which can be defined as transition to post-liberalism world (Wallerstein, 1998). 2. Globalization Process and Central Asia In the currently experiencing global process, it is barely seen that, almost all nations have faced opportunities and threats of global era. As it happened in many geographies and countries, mainly challenging aspects and costs of global financial and economic crisis came into prominence (Elma, 2008: 41 43). Even USA and EU cannot isolate themselves from this inevitable outcome. Moreover, developed world is on the center of the global financial and economic crisis. England, Greece, Italy, Spain, Portugal, Romania and Holland have experienced the situations in which, social upheavals, riots and social unrest even made governments to leave the administration or they have to give up on behalf of the technocrats. So, it is inevitable for Central Asian countries to be out of the challenging and opportunities of the globalization. Central Asian definition is generally about the geography of Turkic nations which had been under the control of Soviet Union (Yalçınkaya, 1998). In the past, this geography had been the center of civilization, science and trade. Tsarist Russia invaded Central Asia and for a long time period, this region under the influence, isolated from the rest of the world. This region was the main supplier of raw materials and agricultural production during the Soviet Union Era. In this context, Central Asia the structural component of the Soviet Union with minimum investment from the central government became the least developed region. As a result of these policies, Central Asia comparatively lagged behind the other Union regions. It derived huge inequality. So that, during the World War II, industrial plants which were exposed to the threats, had been transferred to the Central Asia, but still there were ongoing inequalities. (Pomfret, 1995: 21-26). It is tragic situation of the region; richest countries in the region with the natural resources did have the lowest national income and there was undeveloped industrialization (Dikkaya, 2009: 73 74). However, by the collapse of the Soviet Union, these five countries saved themselves from this isolation and first time in their history, they had chance to have relations with overseas directly. Subsequently, transition period in these countries coincided with the accelerating globalization process. It was quite challenging confrontation. Fast and abrupt transition period and free competition left these countries in an unprepared situation in front of the globalization (Dikkaya, 2009: 82 85). Hopkins and Mansbach states that, (Hopkins and Mansbach, 2008), globalization with its eight distinctive features has been quite clear in Central Asia, after the collapse of Soviet Union: a. Communication technologies which reduces the importance of physical distance, b. Dissemination of information which brings about intensive political participation, c. Global capitalist market, which surpasses state borders and confine state`s control of their economies, d. Homogenization of mass global culture, e. Reign of English language globally, f. More prevalent democratic norms, g. Rise is relative importance of civil society, h. Transgovernmental alliances and networks transcending national boundaries Page 273

4 CHAPTER IV, Globalization and New Economy In fact, as emphasized by Hopkins and Mansbach, the general factors of globalization affects people all over the world. These facts also affected, to some extent, Central Asian societies. In the first period of independence and the transition process Central Asian countries faced the globalization process and, experienced dramatic setback in basic public services, huge decline production and abrupt rise in the unemployment and inequalities. However, on the other hand, we should also briefly state that, in the process of globalization initially troubled countries in region, but also changed their position after 150 years, which was isolated from outside world. Today, Central Asian societies have an opportunity to express their ideas regarding their fate and this opportunity carries vast importance for Central Asian countries. 3. Analysis of Human Development and Socio-Economic Situation of Central Asian Countries during the Globalization Process Assessment of socio-economic development includes following indicators: urbanization, industrialization, volume of middle class population, human development index, GDP, national income per capita, quality of life, economic inequality, education, health, proportion of provided communication and transportation facilities (Elma, 2007: 584). However in this study, we are going to assess socio-economic development level with narrow definition. Thereby, we will include GDP, national income per capita, human development index, inequality, poverty and unemployment as the leading indicator of assessment of the socio-economic development in Central Asian countries. During the first years of independence with the painful transition period, privatization and liberalization took place in Central Asia. By the time Kazakhstan, Uzbekistan and Turkmenistan natural resources played important role in the socio-economic development of these countries. Nonetheless, resource-poor countries as Tajikistan and Kyrgyzstan had lag behind this countries in terms of socioeconomic development. On the hand, during the initial period of independence in all Central Asian countries, unemployment increased, main public services declined and furthermore there were a huge income distribution and standard of living differences which had taken place. It was a grave trauma effect for the societies of these nations, whom has experienced socialism. It was mainly because of the basic fact: during Socialism the convergence of income distribution was prevalent. Statistics data which is about recent situation of these countries, it is barely seen that, socio-economic situation is not that bad comparing with the beginning of transition. Moreover, in 2011, all Central Asian countries are at least in medium human development ranking and Kazakhstan is even in the high human development ranking. Assessment of Human Development Report 2011(HDR, 2011) which is summarized in the Table 1 reveal these basic facts: UN, Human Development programme, by assessing 187 countries, considering indicators like life expectance at birth, mean years of schooling, adult literacy rate and Gross National Income per capita, determined the HDI ranking. Up to this report, among Central Asian countries, Kazakhstan, with the HDI value, does have an outstanding ranking on the HDI report and in the 68th place. Assessment of other countries are like that: Turkmenistan, with value is in the 102nd place, Uzbekistan, with the value is in the 115th place, Kyrgyzstan with the value is in the 126th place, Tajikistan with the value in the 127th place. Table 1. Central Asian Countries Human Development Index and Components (2011) Source: Human Development Report Page 274

5 7th Silk Road International Conference Challenges and Opportunities of Sustainable Economic Development in Eurasian Countries By comparing very high human development ranking values, differences can be seen in following details: for example in Norway, HDI value is And about the components of HDI value, we see that, between Norway and Central Asian countries at the life expectancy at birth value, there is difference ranging from 13 to 16 years. In terms of mean years of schooling difference is 2 3 years. At adult literacy rate difference is not too much. But Gross National Income per capita includes huge divergence, ranging from dollars to dollars. When comparing Kazakhstan, income divergence is dollars, but in the Tajikistan example it is even more than dollars. Among the Central Asian countries, Kazakhstan is leading on all the components of the Human Development Index. On the three components of HDI index value, there is not huge difference. But on the Gross National Income per capita divergence determines their ranking on the HDI. For example, Turkmenistan gross national income per capita is 3000 dollars less than the Kazakhstan, this difference reflected in the HDI index value barely. Turkmenistan, even though have too much similarity on three components of HDI, lag 34 places behind the Kazakhstan. It is quite bare that, main HDI differences between this countries stem from gross national income per capita. Kazakhstan and Turkmenistan are resource rich countries, and the result of oil and gas windfall gains made their well being better than others. In the Table 2, we are going to analyze, trends in HDI between the years This period of time coincides with the end of the first transition period and accelerating globalization. HDR Report 1995 ranks 174 countries, whereas HDR 2011 ranks 187 countries. Kazakhstan again is in outstand situation, this country in 1995 in the 93rd place, but in th place. Turkmenistan stepped upward only 1, Uzbekistan, Kyrgyzstan and Tajikistan`s position not only improved, even slowed back. During these 16 years, it is quite striking fact. Main reasons of this outcome could be new countries on the HDI ranking and their slower economic development. Also, from the Table 2, it is seen that even though there is positive HDI growth as a percentage during , because of the better performance of other and newly added countries, Kyrgyzstan and Tajikistan HDI ranking declined. Table 2. Human Development Index Trends, Source: Human Development Report a positive value indicates an improvement in rank Page 275

6 CHAPTER IV, Globalization and New Economy Table 3. Income Inequality Situation for Selected Countries, 2011 Source: Human Development Report 2011 In the Table 3, income inequality and poverty situation data are given not only for the Central Asian countries but also other developed and developing nations, relatively covers periods of and By considering this data, inequality adjusted HDI 1 value gives us clues how much crucial is the inequality. In Norway and Poland it is bare that inequality does not lower raw HDI value too much, but for example in Tajikistan and in Kyrgyzstan it is relatively high. Also, quintile income ratio 1 shows us that, inequality is Turkmenistan and Uzbekistan is serious problem too. In Turkmenistan, richest 20 percent of population s average income is almost 8 times more than the poorest 20 percent of the population. In Uzbekistan, this ratio is 6, 2. Bringing together with the difference between HDI and IHDI and quintile income ratio, it is seen that, Tajikistan also have some problems in terms of inequality, Kyrgyzstan is relatively better situation, comparing to Tajikistan. Income Gini coefficient 3 which covers the period of last ten years does also provide striking clues. Uzbekistan is in the worst situation. With the low gross domestic product per capita, at the same time population of Uzbekistan is relatively higher. As Table 4 shows, any of other three Central Asian countries total population is less than the population of Uzbekistan. Source : IMF, April, Page 276 Table 4. Population (million persons) Uzbekistan`s economic situation is also can be seen from the Table 5. Even though significant nominal GDP increases, double digit inflation rates for the last 5 years and increasing population keeps the GDP per capita relatively lower in Uzbekistan. Generally, the entire Central Asian countries after independence preferred to establish political stability and economic development. Resource-rich countries Turkmenistan and Uzbekistan have relatively lower human development situation than Kazakhstan. This difference is stemming from governance model of these countries. Kazakhstan is eager to integrate with the rest of the world. Turkmenistan and Uzbekistan chose to remain isolated from the rest of the world. Also, these two countries tried to experience gradual transition period from command economy to the free market economy. Kyrgyzstan is also still having challenging inflation problem. GDP and GDP per capita in term of nominal numbers doubled in last 5 years, because of the reason that Kyrgyzstan started to have increasing growth rates after But global financial crisis was a big unfortunate for this country. In Turkmenistan case, even though inflation rate is generally around single digit, combined effect of inflation and population growth does constrain the high GDP per capita. Tajikistan population does not grow very fast and by the 2008; inflation was still in double digits, even though GDP numbers increase by the time, GDP per capita still remains very low. Another reason for the expanding mining sector is uranium production. Kazakhstan not only produces oil, but also starts to be leading supplier of uranium around the globe. Kazakhstan produces a large share of uranium from mines, 33% of world supply. In 2003, Kazakhstan uranium production was only 3300 tones; in 2010, this figure reached tones (WNA, 2011). For industrial development and industrialization, government plans to implement 162 projects totaling $45 billion in investments

7 7th Silk Road International Conference Challenges and Opportunities of Sustainable Economic Development in Eurasian Countries during (ADB, 2010). This figure equals to the total GDP of Uzbekistan and exceeds the total GDP of remaining three countries. ILO provides unemployment rate about the countries which refers to the employment office records. Because of this reason, combining with the other socio-economic indicators, it is quite understandable that, very low unemployment rate which is given below does not reflect the reality about these countries. For example, population lives under the poverty line in Tajikistan states contorversy with extremely low unemployment rate which is given at Table 6. Because of this reason, inadequate data about Tajikistan, Turkmenistan and Uzbekistan do not let us to make wide interpretations about the unemployment. Table 5. Main Economic Indicators of Central Asian Economies Source: IMF, Regional Economic Outlook, April, In terms of reducing unemployment, Kazakhstan has done too much work: it is mainly because of declining trend in unemployment rate. Vice versa, unemployment rate in Kyrgyzstan has increasing trend. To make a reliable and adequate, we tried to collect all data from the same source. But unfortunately, even ILO databases do not include proper data base about Central Asian countries. Table 6. Unemployment Rates (% of total labor force) Source: ILO database Page 277

8 CHAPTER IV, Globalization and New Economy Conclusion Globalization brings about opportunities and threats at the same time. Within the Central Asia geography, Kazakhstan is the leading country which takes the advantage of globalization. Both in terms of Human Development Index and main economic indicators, in this study we singled out Kazakhstan. In the 1995, on the HDI ranking there were 174 countries, in the 2011 there are 187 countries. Even though 13 more countries had been added to list, Kazakhstan did not lag behind many countries and climbed up 25 places in HDI ranking. Population lives under the national poverty line is not too high and income inequality is not severe. Kazakhstan`s main sources of income are the mining sectors, such as oil and uranium. These windfall gains did not made inequalities and income distribution worse. Turkmenistan, comparing to the remaining three countries is better socio-economic condition. Results are interesting here also, because comparing the resource-rich countries Turkmenistan and Uzbekistan with Kazakhstan, we are not going to observe the similar level of success. In the globalization era, it is the success of citizen of Kazakhstan and President Mr. Nursultan Nazarbayev. Besides, for the Turkmenistan, Tajikistan and Uzbekistan unemployment rates and employed populations` current situation is still under the big question mark. It requires further research in terms of effects of globalization. Kyrgyzstan has the lowest population number in the region, but still struggles with the poverty problem. Even though Kyrgyzstan HDI value showed positive improvement during analyze period, it lost 17 places in HDI ranking. Tajikistan lost 9; Uzbekistan lost 11 places in HDI ranking. Kyrgyzstan and Tajikistan does not possess excessive amount of natural resource, it brings more challenging situation for them for fighting against the negative effects of globalization. Turkmenistan only climbed up 1 step ahead. Besides significant real GDP growth rates, quintile income ratio shows that, income distribution and inequality still remains challenging issues. Also, ILO database does not include anything about Turkmenistan unemployment rates. Because of this reason, unemployment issue is also need to be analyzed with the reliable data. Kazakhstan is on the high human development group in the HDI ranking and it is clearly an outstanding success, others at least are in the medium human development ranking. It means, they are at the beginning and there is still long way to go. Notes 1. HDI value adjusted for inequalities in the three basic dimensions of human development. 2. Quintile income ratio: ratio of the average income of the richest 20 percent of the population to the average income of the poorest 20 percent of the population. 3. 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