Theoretical and Methodological Problems of a Transition Economy.
Journal "Vestnik KazGU". Serial of Economic Siences. Almaty, Kazakhstan, 1998, 11.

Public and economic thoughts of today are greatly concerned about the search of the ways out of the more and more aggravating social and economic crisis. Under this conditions there appeared the necessity of choosing the most optimal directions out of the variety of ways of development and of investigating the main factors that are hampering the public progress and studying the area and regional peculiarities of functioning of these general laws.

Having studied the nature and conditions of operating of these economic laws, people can create new conditions and use these laws in their own interests. As it is known, under the Soviet economic model the mechanism of operating of the objective laws of the market relations was eliminated. And it is due to this fact that it is very difficult to find a reliable way that can lead from the economic system of the Soviet type to the market economy.

The economic transformation in the post-Soviet territory went off without any theoretically substantiated policy. What is more, the economists were under the spell of the ideological dogmas lasting for decades, and were engaged in seeking the ways of perfecting the state socialism practice. But the public requirements in radical transformations that have been advanced over the last decades of functioning of the Soviet model of the deficit economy, led to the so-called "perestroika" and transition to the new economic system.

The efficient system, tried all over the world, was based on the commodity-money and market relations, that's why since the early 90s of the XX th century an intensive process of transition from the planned and command system to the market economy has begun. In ruins of the Soviet power there appeared new sovereign states under the slogans of freedom, market, liberalization of prices, restoration of private ownership by demonopolization and privatization. And they were mainly orientated towards Russia, where the economic reforms were carried out, first of all, under the leadership of new powerful structures that had got their theoretical background from the so-called Chicago Scholl of economists headed by E. Gaidar. Gaidar's policy of the "shock therapy" borrowed from the western economists and supported by the executive branch of power in Russia, then in Kazakhstan and other CIS countries, led to the general liberalization of prices, demonopolization and privatization of the state ownership and to the emergence of the multisructural economic system with simultaneous impoverishment of the considerable part of the population.

Under these conditions economics as a science needed to be given an objective assessment of the unprecedented phenomenon of a transition economy going on in a society. At this time there appeared various theoretical versions of the essence and nature of the transition process.

In the western economic theory there exist two models of the market economy: "liberal market economy" and "socially regulated economy". The former proceeds from the comprehensive encouragement of the entrepreneurship under the minimum interference of the government in regulating business and social sphere; the second model envisages an active state regulation of the economic and social processes as well as the orientation of the market towards the satisfaction of social needs of the population.

Under the conditions of a transition economy the main guideline in Kazakhstan was the formation of the private ownership by demonopolization and privatization of the state ownership, liberalization and the formation of a new monetary - credit system and a number of the other market infrasructures. At the initial stages of reforming there were the attempts of a swift transition to the market on the basis of the concept of the "shock therapy" using the idea of monetarism.

Postsoviet Kazakhstan has experienced hard times stipulated by the collapse of the USSR, rupture of the old economic ties and also by the lack of experience in transforming from the command system to the market relations, and the absence of the economically substantiated theory of transformation. Owing to a number of objective and subjective reasons the process of making up of the multistructural economy was going on spontaneously.

According to the official statistics over the last three years one can witness the signs of economic resuscitation.

In 1997 the growth of GDP came to 102%, while in 1995 it decreased by 8.9%. In 1996 it was only 0.5%. The industrial growth in 1997 averaged 4%. The volume of production increased in other branches of production as well. The republic has managed to reach the financial stabilization and inflation decrease. The inflation rate in 1997 was 11.2%. In 1998 the government reject the direct credits of the National Bank for financing the budget deficit. It has solved its financial issues by using state and treasury bonds for the local markets or by attracting the appropriate foreign loans. The national currency has been considerably strengthened. Some progress has been reached in the legislation: the Civil Code, the laws on supporting small business, development of stock exchange markets, the laws of further improvement of banking activities and others have come into effect. Social expenses from the budget increased by 30% in 1998. The trust of the world in Kazakhstan is also increasing. In 1998 the growth of GDP per capita will reach US S 1524. But in spite of the macroeconomic indexes achieved in 1997, according to the assessment of the Parliamentary Expert Group, the the economy of the country is on the level of 1970-1972. Only some stabilization and growth of the raw materials sector have taken place, but the processing sector has been completely destroyed.

During the years of crisis the share of Kazakhstan in the world real GDP decreased from 0.29% in 1990 to 0.12% in 1997. The main indicator of the social and economic development of GDP per capita decreased from $ 5105 in 1990 to $ 1530 in 1997. The living standards of the population are constantly falling down.

According to the official data, more than 60% of the population live in poverty (practically the whole rural population and 20% of the urban population). The unemployment rate estimated by the foreign experts, has reached 25%. The index of human development in Kazakhstan calculated on the basis of the three indicators: the index of income per capita, the index of education and the index of life expectancy, was in 1993 in keeping with the 54 th place, and in 1996 - with the 93 rd place among 175 countries.

The number of qualified workers, because of their being unclaimed, are reducing, the number of the marginal population is increasing, the status and quality of education are falling down.

According to the obtained data, 544 enterprises don't work and 327 enterprises have passed to short working hours. The number of unprofitable enterprises have come to 6,000 and it is almost 60% of the total number of them.

The gross accumulation of the principal capital compared with 1990 decreased more than twice. The competitiveness of goods produced in the republic is continuously falling down. The labour productivity in agriculture has decreased twice since the period demonopolization. The property of peasants has been appropriated by the former local nomenclature and by different kinds of stooges at the republican, oblast and regional levels. Practically, no investments have been made into agriculture for technical renewal.

That's why, it is high time to take urgent measures to save the strategic sector (agriculture) and the life of the rural population.

And under these conditions the pseudomarket has developed where the main role is played by a state official not by an entrepreneur. That's why the entrepreneurship is engaged not in the development of national production but in the export of capital.

Because of the absence of the available forms of the crediting and because of their complete dependence of commanding structures, small business are hardly advancing.

One of the negative tendences in this process is the budget crisis stipulated by the economic crisis and sharp decrease of the profitable part of the economy namely, because of sale of highly profitable enterprises to foreign companies and because of the absence of qualified management, effective control over the fulfillment of the investment liabilities and remittance of profits to the shadow economy. The process of privatization also turned out to be negative because the revenues from it didn't reflect the real value of the privatized objects. The internal financial flows were mainly directed not to production sphere but financial, to the state securities market. Foreign investments are directed only to the extractive sector of the economy.

Thus, in the Republic of Kazakhstan the conditions for the extended reproduction haven't been created yet.

At this stage of its development the economy of Kazakhstan is experiencing stagnation because of the lack of investments. That's why there are numerous facts of non-payments, unemployment, actions of protests and so on. The main task is to eliminate the reasons of the crisis situation, and reanimation of investments into the processing sector of industry.

The crisis in the Kazakhstan economy is also aggravating owing to the fact that the budget of the republic has become the main source of money for the country and huge embezzlements from the budget (including the non-budget funds) reaching 40-50%.

Besides, the raw materials sector is functioning autonomously from the national sector and from the budget (including privileges, evasion of taxes, profits, damping prices and so on).

As it was mentioned earlier, the objective reasons of the economic crisis have been stipulated by the peculiarities of the economy, being the legacy of the USSR, by the rupture of the traditional economic ties and destruction of the old economic structures. Besides, the errors and blunders of the first governments that delayed and prolonged the reforms in the RK, should be mentioned. They are: the staged liberalization of prices, collective leasing and privatization and drugging out of the introduction of the national currency. The low level of management of the soviet directors at the initial stages of reforms and a high rate of economic crimes may also be considered to be objective factors. The incapability of the population to adapt to the market changes and the market behavioural psychology, the incompatibility of the aggregate social state obligations transferred from the soviet period to the new economic situation, transformation recess are also the objective factors.

At the first stage of the reform in the RK (1991-1995) the process developed spontaneously. It was the period of the general chaos, when inflation, instability of currency, inconsistent privatization, the projects of mass coupon privatization, undeveloped commodity market and so on led to the general imbalance of the economy and to the complete uncontrolled situation. During these years the black market operations and illegality were flourishing. The mass distribution of credits, numerous financial pyramids and stock exchanges, PICs ( Privatization Investment Coupons) and continuous dissolutions of parliaments - that was the unattractive picture of that period. At the second stage (1995-1997) the Government of the RK worked out the concept of selling the leading profitable enterprises of the country to foreign companies. It was supposed that foreign investors would enable us to pursue, without any haste, the policy of stabilization and to develop the processing industry in the national sector.

At the third stage, beginning from 1998, the new government was confronted with the empty treasury and expansion of corruption. Now the strategic sector is separated from the state, the national producer doesn't work, and the stooges exploit peasants.

The banks having monopolized the capital flow market do not want to invest their money into production. The peasants survive thanks to their livestock.

Though the government relied theoretically on the monetary antiinflation policy in accordance with which minimization of inflation to a certain extent is the main condition and stimulus leading to the investment resuscitation in the economy. But industry hasn't become animated, financial flows haven't been directed to the real sector of the economy. Using the monetary formulae it was necessary to adjust them constantly because they are assigned not for the transformation conditions but for the conditions of modernization of the already existing market mechanisms of the economy. One of the main reasons is also the fact that the foreign companies practically became the owners of the profitable sector of industry (because the appropriate monitoring and control were not ensured) and the budget was deprived of the main source of revenues. And the national sector at this time by virtue of the above mentioned objective (rupture of the economic ties, for example) and subjective (plunder by the top officials) reasons demanded serious investments. But because of the budget crisis the state could not have any investment possibilities, though it sold the most profitable enterprises. The well known examples are as follows. According to the contract at Karaganda HES - 2 it was promised to invest 50 million dollars into production, but in fact only 2 million dollars were invested. But 48 million dollars are still missing according to the entry on an account, though it is supposed that this sum has been invested to Pavlodar oil refinery. Up till now not a single sold enterprise has made serious capital investments into the main branch of production. Besides, the state was under the conditions of tough requirements on reducing inflation and budget deficit.

Foreign credits could not be widely used either, because the foreign debts of the country were approaching the critical point. It was the rough blunder of the government of the first stage that granted credits known to be irretrievable.

The investment shortage and nonqualified management in the processing sector led to non-payments and growth of unemployment rate.

There are only some facts of the resuscitation of production at the expense of foreign credits, for example, production of macaroni "Sultan" and manufacturing of iron doors at machine-building plants.

What factors are impeding the RK to go out of the crisis? Under these conditions it is necessary to work out and adopt a new conception of the economic role of the state acceptable for Kazakhstan and to change the mechanism of the state regulation, and then to take radical and definite measures for realising this conception. The recommendation of the IMF on the role of the state in the economy proved to be not so useful for Kazakhstan, because it is impossible to rely only on licence and taxation policy. An active role of the state and its limited interference in the economy are envisaged in the strategy of the President of the RK "2030".

As it was mentioned earlier there exist different models of market relations. Each state has its specific national interests that considerably influence these models. The conception of the economic structure also influences the choice of the mechanism of the state regulation. And the world practice shows that the state influence may be considerable even though the state share of property is not so great. For example, in Japan the share of state property comes to not more than 10%, but the role of the state is considerably strong.

The economic functions of the state experienced by many other countries may be used by the RK as well. They are as follows: protection and ensuring the rights of ownership; creating favourable conditions for entrepreneurship; stimulating the active work; combating monopolism, regulation of the money circulation; regulation of interrelations between labor and capital; ensuring the economic security and so on. Now for the RK it is extremely important to ensure and preserve the complete state control over the strategic enterprises, the main source of the budget revenues. All over the world the state commercial companies work not less effective than the private ones.

An efficient budget and monetary-credit policy must act as the mechanism of the state regulation. As a result, investment expenses for reanimating the processing sector of the economy may be increased.

For the economic growth of the RK it is also important to reconsider the contracts and to bring them in line with the legislation and economic conditions of the internal market of the Republic: restriction and gradual elimination of unjustified privileges for the foreign capital; efficient attraction of direct foreign investments into the processing industry and agriculture; and comprehensive stimulating of small business; reduction of the tax burden by perfecting the tax mechanisms of foreign borrowings; refusal, as far as possible of loans and credits from the IMF and their restructuring; development of stock exchange markets.

Under the present economic situation it is very important for the RK to determine the fundamental principles of research of a new economic system called a mixed economy. Among a variety of methods of studying the reality, the priority is given to the research of the objective tendencies of development of the world economy and of the national and individual peculiarities of each state. For the theoretical breakthrough in the research of the transition economy, it is important to give up the idea of making absolute of some doctrines of economics. In this case the role of the systematised approach to the socio-economic problems is very significant, though it is extremely complicated and contradictory by its nature.

The leading force in the economy of labour are the people of labour. The further progress and well-being of the people of the RK depend on their creativity and entrepreneurial activity.

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