Chapter 3 findings and recommendations

3.1 The Neoliberalims: The severance of Agricultural Sector

The globalization that occurred by capitalism can be characterized as the trans-nationalization of production and trans-nationalization of finance and global spread of neo-liberalism. In the end of 20’th century neo-liberalism, ordering the unregulated market economy, minimization of ‘social state’, ‘free trade’ and massive privatization, became the dominant economic doctrine in place of Keynesianism, stipulating regulated market economy if needed and aiming to achieve the full employment.³⁶ Moreover ‘neo-liberalism is a kind of philosoph, substituting for all previously existing ethical beliefs’.³⁷( Zhussipbek, Galym, “The Ascendancy and Fall of Neoliberalism in Kazakhstan: The Power Of Ideas”, USAK Yearbook of International Politics and Law (4/2011), Issue: 4, 2011, pp. 347-351)

At the beginning, neoliberal capitalism started in Great Britain and the USA, later was spread around the world through the neo-liberal restructuring programs adopted by the global institutions such as World Bank and International Monetary Fund (IMF), policies pursued by Transnational Corporations operating in global scale and through the leading universities, prominent intellectuals, politicians and big mass-media.³⁸

In 1990’s, Kazakhstan met a strong transition period. Kazakhstan along-side with its biggest political and economic partner – Russian Federation, embarked on the way of rapid economic reforms and more than the other post-Soviet states went under the direct influence of global economy and finance and therefore encountered with many negative sides of capitalist globalization, specifically of neo-liberalism. The effects of the prevalence of neo-liberal economic doctrine in Kazakhstan in 1990’s can be summarized as the following: the substantial decrease of social expenditures, prolonged crisis holding in iron fist the agricultural sector and non-export-oriented sectors, massive exodus of rural population to cities, massive privatization with many excesses, unregulated market relations, the dominance of foreign companies in hydrocarbon producing (oil and natural gas) sector, the emergence of the powerful banking sector which is detached from production sector but indulged into speculative transactions inside the country and abroad.

Kazakhstan’s Agriculture has been in prolonged crisis from the initiation of market reforms. Restructuring efforts of the country’s agricultural sector based on neo-liberal economic model became disappointing, even failure. Liberalization of input markets combined with the significant decrease (even total disappearance in some regions) of state support for farmers contributed a lot to the emergence of the crisis in agricultural sector. Agriculture used to be the second largest sector in the Kazakhstan’s economy, contributing 30 % of ‘net material product’,³⁹ but in 2009 agriculture comprised only 6% of the national GDP.⁴⁰ The level of production of agricultural goods decreased so substantially, that at present internal demand for berries is satisfied for 30%, demand for early vegetables is satisfied only for 4 %, sugar beet for 6%.⁴¹

It is obvious that Kazakhstan today is the biggest economy, and the most successful state in the Central Asian region, Kazakhstan’s nominal GDP estimates 128.6 billion dollars, GDP per capita is the highest in the region (11 800 US dollar)⁴², and it is well known that the economic and political transformation played the crucial role in the birth of the present-day Kazakhstan. However Kazakhstan’s state and private institutions could be more stable, the economic and social situation could be much more better, the gap between rich and poor would be more narrow, and national economy would be more diversified, more stable and less dependent on the extracting sector, if there were not negative consequences of the application the neo-liberal economic doctrine.

Neo-liberal economic policies failed Kazakhstan’s economy and society in many different ways. It is a sad story how neo-liberal economic model turned Kazakhstan, former leading Soviet producer of agricultural goods (such as meat, meat- related goods, vegetables, oil-crops, sugar) into the country which is need to import these products and which is desperately seeking to revive own agricultural sector.

The most catastrophic situation appeared in the meat production sector. If in1990 there were approximately 10 million cattle in Kazakhstan, in 2009 the number was only 6 million. In 1990 the amount of produced meat in Kazakhstan was more than 1.5 million tons, however in 2009 only half of this amount could be produced, in 1990 the amount of meat export accounted for more than 300 hundred tons, whereas at present Kazakhstan is an importer of meat! In 1950, in the post World War II period the number of famous Kazakh breed of cattle had estimated 1 million 160 The head of the Kazakhstan’s Farmers Association A.Darinov warned that half of all farmers is at the brink of bankruptcy and what is the most tragic that the cattle-breeding on distant pastures (the centuries-old tradition of Central Asian nomads) has been totally destroyed, as the consequence of neo-liberal reforms, prescribing the privatization of land, even the seasonal distant pastures.

Eventually the neo-liberalism fell from grace of Kazakhstan’s political and economic elite, many local scholars and intellectuals have been criticizing it for a long period. The ongoing global crisis empowered for good the desire of Kazakhstan’s leadership to change direction from neo-liberalism to the ‘regulated capitalism’. Truly, ‘the current global crisis was created by the existing free-market system and by way of fundamental reform, the world should move from neo-liberal capitalism in the direction on a social, fair distribution and full employment’.⁴³ At present, anti-crisis strategy adopted by Kazakhstan’s government aims to achieve the above-mentioned goals. The Kazakhstan’s private banking sector having acted in accordance with neo-liberal logic became entrapped i nto financial problems, which could lead even to the country’s default. The government took under the direct control the leading private banks, helped restructure their debts and paid parts of their foreign debts. Furthermore Kazakhstan’s government embarked on the policy of increasing the government’s share in hydrocarbon sector, which was kept under the control of foreign companies and other ‘strategic sectors’ of national economy.

Kazakhstan’s leadership adopted a diversification strategy to achieve long-term growth. Kazakhstan’s leader N. Nazarbayev in his address to the nation in January 2010, went as far as to call the hastened acceleration of the economy’s diversification a key principle of the state’s broader strategic plan for the economy over the next decade. This strategy can be implemented only by direct involvement of the government in countries economy. In lines with this strategy the government will allocate financial resources to both state-owned and private companies. The government aspires to improve the ‘internal food security’ and develop the agricultural sector, increase the agriculture added value and boost its share in GDP and total exports. The government adopted the decision to build 15 large cattle-breeding and meat- producing enterprises in six different regions of the country. ⁴⁴

On the other hand, Kazakhstan established Customs Union with Russia and Belarus. This try can also be regarded as response to the negative consequences of the neo-liberalism. Since ‘developing countries have much greater need for trade protection than do the developed countries, because they need to develop new industries in order to diversify and upgrade their economic activities so that they can achieve higher living standards. Therefore, infant industry protection is an absolute must for these countries. As the developing countries are in need of higher tariff protection, allowing higher tariffs for them is simply a ‘differential’ treatment, and not a ‘special’ treatment’.⁴⁵ However in countries such as Kazakhstan and Russia the powerful groups preferring ‘free trade’ and unregulated capitalism over ‘regulated’, such as companies producing and exporting raw-materials and export-import companies exist as well.

As a conclusion it can be stand out that, financial and economic resources, knowledge (especially high technology and social sciences inculcating a ‘chosen bits’ of knowledge as a ‘common sense’ in the mind of people), international regimes and norms have become the key factors in shaping the global political and economic system. Truly, ‘reality’ is not only the physical environment of human action but also the institutional, moral and ideological context that shapes thoughts and actions’.⁴⁶ That is why production is understood by critical theorists in a broad sense, ‘production is not confined to the production of physical goods used or consumed. It covers the production and reproduction of knowledge and of the social relations, morals and institutions that are prerequisites to the production of physical goods’.⁴⁷ In other words, ideas such as neo-liberal economic doctrine, are themselves part of reality, as Cox puts it, ‘theory is always for some one or some purpose’.⁴⁸