However favoured Georgia may be by nature, and however rational the democratic methods of its socialist government, its situation was anything but brilliant.
We have already described the chief causes of its distress. They consist in the dependence of the economic life of Georgia upon foreign countries. Without the importation of corn, as well as of industrial products, and a corresponding exportation of its own products, such as manganese, copper, tobacco, wool, silk, and wine, the country cannot exist. The old trade connections were destroyed by the war, which still continues on the borders of Georgia, and renders difficult any relations with other countries. This is doubly unfortunate at a time when world commerce is impeded by various measures arising out of the after-effects of the war and the general lack of confidence, which would be merely ridiculous if they did not involve the ruin of the people.
The Georgian Government is not in a position to change these disastrous international conditions, and thus the people of Georgia, like so many other peoples, must suffer from their effects.
The inhabitants of the capital of Tiflis were hit the hardest. Until the revolution Tiflis was the political centre of the whole of the Caucasus, a territory with about ten million people. To-day it forms the capital of little Georgia, with three million inhabitants. This country by itself must sustain the 400,000 inhabitants of Tiflis. This would not have been a simple matter in a state of uninterrupted world trade, but the task assumes fearful proportions in the conditions of restricted trade. Add to this that Tiflis, instead of losing its inhabitants, revealed a large increase of population.
For with all its distress it was a paradise when compared with its neighbours, Armenia, Aserbaijan, and Russia, where Bolshevism reigns, not only with hunger and misery, but also with sullen silence and everlasting fear, with the lack of all freedom of speech and of the Press, with denunciations, arbitrary imprisonments and shootings, with brutality and cruelty. Those who can flee from this hell – the counter-revolutionaries to Europe; the workers from the towns to the villages, many democratic and social-democratic intellectuals, and qualified workers fled to Tiflis. Even Bolshevists sometimes sought a refuge there, in order to recover from Communism,. Through this immigration the intellectual life of the town was variously stimulated. Eminent men of learning, and artists from Russia met together here. But the house famine was made ten times worse.
After high prices the housing shortage is the most generally diffused after-effect of the war. It is to he found even in New York. The war has used up so much capital, and so much of the productive forces, that with what is left one is only able to live laboriously from hand to mouth. There is neither capital nor resources for undertakings which will repay the, outlay on them only after many years. Above all, not for buildings. All building activity is paralysed. In addition, numerous dwelling-places situated on the various theatres of war have been destroyed, and the inhabitants driven into countries which were spared by the war. In those counties the accommodation, not having been increased, suffices no longer.
Again, in those countries which did not take part in the war the population has been increased by the normal processes, which still more accentuates the housing difficulty.
Although the shortage is by no means confined to Tiflis, together with the lack of food, it has been ascribed by the Communist propaganda there to the Social-Democratic Government. This propaganda is addressed to, the simple, folk who do net know that in Russia. not merely dearness, but the most desperate hunger prevails. The housing shortage is certainly abating in many of its towns. In Petrograd thousands of houses! are empty, as of the population of that city one-third has either starved, or frozen, or fallen victims to pestilence or the Extraordinary Commission. Another third has fled to the villages, and the remaining third still prolongs an anxious existence in the town.
As is the, case everywhere, else in the world, the building of new houses in Georgia is much impeded by the absence of long credits. This is connected with the general lack of capital, but also with the wretched state of the exchange.
This constituted the weakest point in the economic life of social-democratic Georgia. The Georgian rouble was last year worth less in gold than was formerly worth a kopeck, although its value remained considerably higher than that of a rouble of the Russian Soviet Republic.
As is the case with other countries, the principal cause of the fall in the value of the Georgian rouble is to be looked for in the inflation of the currency, and the excessive output of paper money. One immediate result of the revolution was to reduce considerably the revenue of the State. The old State constitution, being corrupt and inimical to the people, had to be radically reformed, which was not a simple matter in view of the lack of native experience. The new State machinery did not always work well. It takes time to accustom the emancipated peasant to pay taxes, and the revenue from duties was very slight in consequence of the paralysis of trade. The State possessions alone will suffice to cover the national expenses, when once, they are properly exploited, and all taxation would be rendered unnecessary. The Budget of 1919-1920 estimated the income of the State at 749 millions of roubles, of which 576 millions, or 76 per cent, would represent revenue from, the national properties. But the war has thrown the State undertakings into a condition of confusion, and lowered the revenue from them. The large estates, which were taken over from. the old regime, yield a surplus, it is true, but this is not very large. Before the war the railway was one of the few Russian Static lines which earned a net profit. On account of the lack of masuth, and the great exhaustion of, material by the war, and lately by reason of the cessation, of trade, the services had been so restricted that they barely covered the running costs of the undertaking. Repairs can only be effected out of State resources, and many repairs are necessary.
Generally speaking, the exploitation of the national properties of Georgia, such as the forests and mines, has not yet been undertaken. Before they can be set working large outlays are needed for roads and railways.
Thus a great portion of the State possessions yield no immediate revenue, but entail expenditure.
Simultaneously, other branches of State expenditure have grown enormously. It is not merely a question of repairing the immense damage wrought by the war, but special demands are made on the Government because of its socialistic character.
A Socialist Government is not only expected to prepare the way for the development of socialistic production, which, measured by our impatience, is a protracted task. It must also put ad immediate end to all the poverty which it finds in existence, If the kind of poverty which Capitalism creates is to be found in Georgia in no small degree, all the more abundant is the Poverty which has been accumulated by the cheek to capitalist development – poverty which has arisen from Feudalism, Absolutism and War.
To make an immediate end of this poverty, with the scanty and impoverished resources of the State, is a task which no government could achieve unless it were possessed of magical powers. And Our comrades, who have been placed in power by the! revolution were not only no wizards, but Menshevists, who neither believe themselves nor seek to persuade the outside world that a dictatorship endows. them with magical powers.
However much the Government might strive to keep the tasks which it set itself within the bounds of economic possibilities, the everlasting demands which were pressed upon it surpassed so, much the extent of the available income of the State that the printing press was the only resource which was left. Consequently, there was a constant fall in the value of the rouble, and a continual increase in prices.
The evil was still more accentuated by the adverse trade. balance. Trade with Russia, which formerly constituted. the chief part of the export of tobacco, wine, mineral waters, etc., has, been destroyed to a large extent. This rendered maritime trade with Europe, via the Black Sea, all the more important, but this trade had been restricted for a long time owing to the lack of shipping space. Georgia imported from Europe highly valuable industrial products, which occupied little space. In exchange it had to offer only raw material, which, in relation to its value, occupied much shipping space. No wonder the value of imports exceeded the value of exports. In the year 1919 Georgia imported from Western Europe, Turkey, and America, goods to the value of 397 millions of roubles and exported goods to the value of only 9,3 millions. In the year 1920 the trade balance considerably improved. On the other hand, the inflation still continued.
All this tended to depress the exchange to the lowest point. Still worse than the falling of the rate Of exchange, and the dearness which it caused, was the constant fluctuations in the exchange, which occur in all countries with a system, of paper money. This makes all business uncommonly difficult. Under these circumstances, long period credits are not to be looked for, and short credits are available only under oppressive conditions. As no one knows what prices and money values will be in the future, there is a preference for cash payments. Credit is the most potent means to vivify the mass of capital which exists in society. Without credit the scope of a given mass of capital is notably restricted. The effect is especially paralysing at a period when the mass of capital is greatly reduced by the ravages of war.
Another circumstance is not less harmful. Under existing conditions there is little incentive to invest capital in undertakings, which do not turn over their capital rapidly. Consequently there is the strongest motive to employ capital in money – speculations and usury instead of in industry. So long as a capitalist mode of production exists, it is in the, interest not only of the whole of society, but also of the workers, that the available capital be embarked upon productive industrial undertakings giving employment to workers and increasing the sum of commodities. It should not parasitically be employed in speculations and usury, which employ no workers, yield no products, and only increase prices.
The system of paper money not only threatens the State with complete bankruptcy, and with absolute worthlessness of the money which it issues; it has brought growing confusion and paralysis into, the whole economic machinery.
This condition can only be, dealt with by placing the State finances upon a sound basis by balancing income and expenditure, so that the activities, of the printing press may be stopped. But how is the State to obtain the revenue it needs so long as trade and commerce are suspended? Thus we find ourselves in a vicious circle, out of which there seems to be no. way; economy cannot become healthy without sound finances, and these, cannot become sound unless economy becomes healthy.
A considerable improvement could be effected if normal peaceful conditions were established among Georgia’s neighbours, if the civil war and campaign of conquest ceased in, Russia, Aserbaijan, Armenia, and Anatolia, and Georgia could find there a market for its own products, and could also resume in full measure its function as a trade channel connecting East with West.
This general condition of peace would alone lead to a marked change in the economic position of Georgia.
It is also most desirable to remove the restrictions which hamper the, traffic of steamers through the Dardanelles, and which are the result of the state of war still prevailing in that quarter. Then, the postal communications between Georgia and the outside world must be: made more prompt and secure. The present state of these communications is deplorable, which naturally prejudices: all business relations, with Europe.
Even when all these improvements have been introduced, the overcoming of the financial crisis of the country will remain a very difficult problem It is hardly conceivable that the crisis can be completely mastered without a foreign loan, which would cover the deficit of the Exchequer for one or two years, and thus grant the State a breathing space during which it can function without using the printing press. If this respite were wisely and energetically used, it should be sufficient to develop so far the economic resources of Georgia that the finances could be placed on a stable foundation without requiring further assistance from outside.
In this respect attention would naturally be paid first to an increased exploitation of the national possessions, which involves the building of railways, such as a line to the coal fields of Tkvartschedi, and roads to open the great forests.
With all this is closely connected the encouragement of agriculture. The drainage of 50,000 hectares of swamps at Poti, the irrigation of 150,000 hectares in the east – for these improvements the preliminary work of survey has already been done – would suffice to render Georgia independent of outside help for its sustenance.
An improvement of agriculture may already be expected from the transformation of the peasant from, a leaseholder into a freeholder. This process can be. accelerated by the giving of instruction in agriculture. It is true that the small extent of the holdings is an obstacle to a rational system of agriculture which is to yield a substantial surplus. And this surplus is all-important.
It is recognised even by many supporters of small holdings in agriculture that large-scale production yields a larger net profit than small undertakings, but of the latter it is asserted that the gross yield is greater. But even if this is the case, it would not dispose us more favourably to small holdings. The mass of mankind who live in society outside of agriculture depend upon its net profits. We speak of society and not of the State, because an individual State can find a way out by importing the means of subsistence. Without a large surplus from agriculture, there can he no large population of those engaged in intellectual and industrial pursuits, no high level of civilisation, and therefore no technical progress in agriculture itself. The transformation of a rational system of large-scale agricultural production into small holdings signifies a decrease in the surplus yielded by agriculture. It means an increase in the amount of labour-power required for agriculture, and a decrease in the non-agricultural population, and thus a set-back to civilisation. Militarists, who look to the peasants for numerous recruits, might well be enthusiastic for small holdings. Modern Socialists, who, have at heart, not the strength of the, armies, but the level of civilisation, must support Large-scale agriculture.
With the exception of the undertakings of the, State and municipalities, few opportunities existed for large-scale agriculture in Georgia after the. agrarian reforms. Large estates worked by private capital are scarcely likely to arise.
Perhaps the transition stage to rational methods of agriculture may give, rise to the development of the communal direction of husbandry. This is already the case with pasture land. Communal agriculture would be large-scale cultivation.
There are, many reasons why communal agriculture should be adopted in Georgia. We have seen above that the old type of plough requires; ten, to twenty animals to draw it, with four, and more men, of course, these resources are, not at the disposal of an individual small peasant. This difficulty is overcome by several peasants joining together for ploughing their fields. Such co-operation is, constantly found convenient for other purposes than ploughing. As many as fifty small peasants combine together in, order to perform the same, work in common on, one of their fields after another, and thereby enjoy the benefits of this co-operation. This practice is called by a special name, Nadi, and the songs which are sung during work in common to give to it the appropriate rhythm are called Naduri. This system of combined labour would be more successful if the many small fields were not separated, but thrown together and worked according to a common plan. This should he, made considerably easier after the partition of the land has equalised the size of the: separate holdings.
This process should also, be aided by the introduction of modern. agricultural machines, which the individual peasant is too poor to acquire, and which can be employed with success only over a large extent of ground.
It is therefore probable that in Georgia a system, of cultivation by village communes will grow up, which, although not socialistic in the sense that it produces for the market, yet will be a nearer approach to Socialism, and a better organisation of labour-power than agriculture which is based on; small holdings.
Meanwhile, the: domain of agriculture is not the only sphere in which it is needful to, make good as quickly as possible the effects of the neglect and obstacles due to Feudalism and Absolutism. The general level of civilisation must also be raised by an improvement in education. In this province significant progress has been made by the Socialist Government, in spite of its lack of resources.
Finally, it is absolutely necessary for the prosperity of Georgia so, to develop its industry that as far as possible the raw materials are made use of in the place where they are produced. Paper factories and furniture factories to realise the wealth in, the form of wood, factories for preserving fruit and vegetables, spinning and weaving sheds, for wool, silk and cotton are. above all necessary. Next to them are wanted factories for the production, of implements and simple machinery for agriculture.
We have seen that the municipalities and the co-operative societies have already commenced to work on these lines. But we have also pointed nut that they can only proceed very slowly, if they are to maintain a secure footing and avoid mistakes. Moreover, they suffer from want of capital.
Here there must also be some assistance from abroad if the development is to be rapid and energetic. Only the Western Powers and America have the resources and experience available to permit large undertakings of this kind to be established and properly directed – But capitalism still prevails in those countries. For the present, help can only take the form of the investment of foreign capital in Georgian industrial undertakings.
Foreign loans to stabilise the State finances, to build railways and construct irrigation and drainage works, and foreign capital to establish factories are urgently necessary in the interests of the Georgian people, and of the Georgian proletariat as well. Where capitalist economy is still the order of the day, the worker thrives best with a rapidly growing industrial capital. A suspension of capitalist growth bits him the hardest.
The Georgian Socialist Government found itself in the paradoxical situation of being obliged to create conditions which will attract capital – that is, by promising a profit and giving the necessary guarantee that one fine day it will not be expropriated without compensation.
This was not an easy problem for a Socialist Government to solve. But as this Government was composed of Menshevists, it was aware of the economic necessities and would do voluntarily what the Bolshevists are now compelled to do by circumstances, after they have pursued the opposite policy for several years past, in the doing of which they have fearfully devastated and ruined the whole of Russia.
Last updated on 21.1.2004