Why should I be interested in this topic?

A sociological study shows that poverty, along with unemployment, has been one of the main challenges for the population of Georgia for the last 10 years. In 2010-2020, the share of the population living below the extreme poverty line (whose income is less than the subsistence minimum) in Georgia decreased from 37% to 17.5%, although the share of people receiving a social allowance in the total population is increasing.

At the same time, the gross domestic product is increasing. This raises legitimate doubts about the fact that Georgia’s economy is not oriented on the welfare of the population, and the created wealth is in the hands of small groups. It is therefore crucial to analyze the causes of economic inequality and identify ways to address the problem.

Our commnet 

One of the main causes of economic inequality in Georgia lies in the shortcomings of the vision of socio-economic development. Despite the changes in governments, the model of economic development dependent on foreign investment, tourism, and the real estate sector remains unchanged.

These sectors neither create a large number of employment opportunities nor contribute to the country’s medium-term and long-term sustainable development. At the same time, state support and legal framework are primarily oriented at protecting the interests of investors and employers. This often violates workers' rights and threatens their physical well-being. Against the backdrop of poverty and income inequality, the country lacks an effective social policy that would facilitate more or less equal distribution of resources and wealth.

Therefore, the majority of the population of Georgia struggles with economic hardships against the backdrop of high inflation, and often finds a solution in emigration.

What is the problem?

Despite the hardships of a large part of society, government officials refer to statistics that indicate the country's economic growth. Politicians often don't give wrong numbers, but we must remember that statistics can be manipulated.

By selecting the right data, it is possible to draw a reality that shows only one side of the coin. This is often the case with the media when, for example, they focus on economic growth and say nothing about inflation or poverty.

In Georgia:

• It appears that the growth of the economy has been driven primarily by Russian capital, a phenomenon that may have an ad-hoc nature rather than a systemic one; 
• The increased turnover of the construction sector and real estate made a significant contribution to the GDP growth, which is also directly related to Russian citizens' immigration to Georgia;
• Economic growth is also due to the reactivation of economic activities after the Covid pandemic;
• The inflation level is high, which leads to an increase in consumer prices for goods and services.

Moreover, Georgia’s economy is greatly influenced by the money sent by immigrants from abroad. For example, in 2021, remittances in Georgia amounted to 2.35 billion USD, which was 13% of the country's gross domestic product.

Even though the migration balance (the ratio of people leaving and entering the country) in 2022 is positive, unlike in other years, it is essential to look at the data in more detail.

• In 2022, the highest number of people emigrated from Georgia for the last ten years.
• Their number was more than 100,000 citizens, which is twice the number of those who returned to Georgia;
• At the same time, more than 60,000 people immigrated to Georgia from the Russian Federation, which is about 6 times higher than the figure from previous years. Russian citizens' mass immigration directly affected the increase in real estate prices.

Therefore, we can conclude that the model of Georgia's economic development does not and cannot provide prosperity for the majority of society. The chosen model is not oriented towards building a sustainable economy. It focuses on short-term growth and ignores both the need to redistribute this growth in society and avoid the social and environmental costs of such growth.

What can be done to solve this problem?

Various political and economic factors determine the improvement of the country's economic situation and the increase in welfare for large groups of the population. In order to eliminate existing socio-economic problems, it is necessary to:

• Implement political reforms to strengthen democracy and restore public trust in state institutions;
• Review the vision of economic development. The state should promote the development of particular economic sectors (eg, technologies and innovations, light industry, agriculture, etc.);
• Increase access to capital for small and medium businesses;
• Carry out changes in the education sector in accordance with the revised economic policy, in order to prepare and equip qualified workforce with the necessary skills;
• Reduce monopolies;
• Implement strong, proper, systematic social policy (strengthen vulnerable groups, implement proper housing policy, provide universal access to health care services, education, etc.);
• Regulate labor market (adopt minimum wage, promote formal employment, monitor informal employment, ensure decent working conditions, labor safety, etc.);
• and etc.

Therefore, 

To overcome the challenges, the state should reform its policies to transform neoliberal economic model into a model focused on public welfare.

Structural political and economic reforms will contribute to developing the economy, creating jobs, ensuring decent wages and working conditions, and reducing poverty and income inequality.