Popular Myths About the Belarusian Economy

Stereotypes reduce the complexity of the world into a few simple guidelines, which can enter everyday thoughts and decisions. For years, Belarus has been repeatedly labeled “Europe’s last dictatorship,” thus inhibiting deeper and more serious analysis of the country. Moreover, fighting this stereotype can prove awkward. For is Belarus a paragon of democracy? No. But that is the presumed implication if it is asserted that Belarus is not a dictatorship. Recently, a well-known Western specialist with a distinguished record of scholarship on Belarus and a history of being sharply critical of its leadership suggested publicly that President Alyaksandr “Lukashenka is no dictator” (Svaboda.org, April 18). In response, some vigilant readers quickly suggested that the scholar in question was perhaps on Lukashenka’s payroll. Yet, this was only one of the more innocuous reactions to such a contrarian view regarding the Belarusian leader. Others denounced the entire body of the Western expert’s scholarship and argued that the scholar was probably allowed to enter Belarus—after seven years of being denied a Belarusian visa—in exchange for the aforementioned public statement.

Perhaps a less notorious but equally tenacious stereotype applies to the Belarusian economy. According to a “commonly held” view, Belarus has a socialist economy—an extension of its Soviet predecessor. The argument further insinuates that rampant privatization, a repeal of all government subsidies on utilities, and a curtailment of social programs would set in motion a painful but necessary transformation of the country. By remaining on life support financed by Russia, Belarus is simply postponing the inevitable, this line of reasoning goes, and drives the problem into a dead end (Naviny.by, April 21). Meanwhile, a group of government-friendly pundits, whose professional specialization is in the humanities, not economics, embraces a mirror stereotype. These commentators assert that anything evocative of economic liberalism is harmful for Belarus and reflects color revolution conspiracies immanent to treacherous Western puppet masters. They declare that their country will survive while preserving its current socio-economic model (Eurasia-Expert, April 26).

The point about those stereotypes is that they are neither right nor wrong. But they exist in a parallel world. Their authors and disseminators are fixated on a certain aspect of objective reality congruent with their preconceived notions, which are then projected onto an entire economic and political system. It is true that Belarusian state-run enterprises produce a larger fraction of the country’s gross domestic product compared to its post-Soviet neighbors. However, Belarus significantly outperforms Russia and Ukraine on social indicators such as morbidity, mortality and social infrastructure (Grigory Ioffe and Viachaslau Yarashevich, “Debating Belarus: An Economy in Comparative Perspective” Eurasian Geography and Economics, 2011, 52, No. 6, pp. 750–779). At the same time, comparisons with the European Union’s former Communist member states undervalue how much more support their economies receive thanks to large financial transfers from Brussels compared with what Belarus receives from Moscow. Even so, Belarus outperforms its neighbors Latvia and Lithuania when it comes to the quality of their roads and the maintenance of their cities, not to mention the scale of outmigration of their best and brightest. Russians routinely praise Belarus while on personal visits, although they prefer to attribute Belarus’s positive attributes exclusively to the good management of Russia’s generous financial aid.

It is also true that Belarus’s consumption boom of 2003–2008 and its uninterrupted economic growth from 1996 to 2014 partially derive from high international oil prices and the fact that Russian tycoons used the country as an offshore tax haven. When oil prices fell, this had a three-pronged effect on Belarus. First, the price of refined oil—an important component of Belarus’s exports—also dropped. Second, the Russian market shrank, and Belarus was unable to export as much of its machine-building products to Russia as before. Third, Russia’s ability to support Belarus went down, as well. Thus, according to Alexei Pikulik, who heads the Belarusian Institute for Strategic Studies, in 2006 the share of Belarus’s GDP attributable to Russia’s price concessions on oil and gas was 24.5 percent; by 2012, it had declined to 20 percent; and by 2016, it was only 4.6 percent (Kyky, April 19).

Because succession does not equal causality, it is not clear whether Belarus’s ever-increasing reliance on classic market mechanisms has resulted from this staggering decline. Regardless, whereas in 2006, Belarus was 126^th in the World Bank’s Doing Business report, today it is 37^th; Russia is in 40^th place (Kyky, April 19). This progress largely pertains to the ease of registering a private business. For a number of years, the International Monetary Fund (IMF) commended Belarus’s Central Bank for its healthy financial policy (Tut.by, April 2). The Belarusian government is no longer attempting to inflate the GDP via subsidies and by printing money. A gradual reduction in subsidies to consumers of communal utilities and a cutting back on subsidies to state-run enterprises has been underway. The priority local authorities enjoyed when it came to acquiring shares of local enterprises has been outlawed; and a five-day visa-free travel regime for Westerners has been introduced. Retail regulations and public catering areas of private business have been curtailed. In early March, a “revolutionary document” was prepared for the president’s endorsement. In includes a moratorium on all state inspections of retail, catering, and consumer services establishments (except sanitary and fire inspections)—a scourge of small businesses. It also relieves retail outlets smaller than 100 square meters and restaurants with fewer than 50 seats from having to pay value-added and profit taxes; whereas individual entrepreneurs are to be relieved from paying the income tax (Tut.by, March 6). Lukashenka has not yet signed this document. But the fact that it has been drafted by a government ministry is telling.

In the meantime, several state-run industrial giants, notably the Minsk Tractor Factory, the Gomel Agricultural Machinery Plant, and the Belarusian Metallurgy Plant, have stopped incurring losses (Tut.by, April 26). Moreover, in the first quarter of 2017, Belarus’s GDP recorded growth (+0.3 percent) for the first time in two years (Tut.by, April 17). The government predicts 1 percent growth for the year (Belta.by, April 18).

When it comes to stereotypes, all or most of them will linger a long time. As per Nickolas Kristof, “when we have a narrative in mind, we often plug in anecdotes that confirm it.” Nevertheless, reality will evolve down its own path, undisturbed by popular mythology.