Money in Georgia, Part II: Georgian Economy

This post is sort of rambling and disorganized, so I apologize in advance. There’s a chance I’ll one day want to throw some research together on this topic, at which point I’d write an actual journalistic article rather than a stream of consciousness about Georgian economics.

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As I walk in the streets of Tbilisi, it is striking that there are casinos and slot clubs with their lights on full force (especially given that electricity is expensive in Georgia), that there are people to fill these casinos, that there are people who drink at expensive bars that even I can’t afford, go to clubs where a bottle of wine costs 100 lari or more, who own BMWs – basically, that Tbilisi has a relatively sizable class of people who are, from an outside view, extremely affluent. Most Georgians that I know seem to own homes or live in homes owned by family members – and many families own more than one home.

And yet, from everything I hear, Georgians view themselves as poor.

Rumor has it that the average Georgian teacher makes 100 to 200 lari per month in salary. Georgian police, from what I’ve heard, start at around 600 lari per month. Georgian factory workers make about 100 lari per month. I’ve heard that if you work for a technology company or a foreign or international company, you make 1000-2000 lari per month, but I’ve heard these jobs are rare.

Rumor has it that Georgia has a 50% unemployment rate. I see Georgian men playing Backgammon in the streets all day, smoking cigarettes, drinking homemade wine or chacha. There are a ton of unemployed doctors and engineers in Georgia who become police officers or cab drivers to make ends meet.

This situation left me with more questions than answers, until I started talking to people and putting the pieces together. How do people live on such a small amount of money? How can people afford to be chronically unemployed and just sit and play backgammon all day? How can there be so many people to populate Tbilisi’s expensive bars, clubs, nightclubs, and casinos with willing spenders in a country where most people have no money at all to spare for such frivolities?

First of all, to my understanding, there are about 9 million Georgians in the world. Half of them live in Georgia, and the other half don’t. Of the 4.5 million Georgians in Georgia, 1.5 million live in Tbilisi, and most of the rest live in rural areas.

So, demographically, about two thirds of the population of Georgia itself derive some value from low-level, small-scale agricultural activities. They grow crops, they have vegetable gardens, they raise chickens. They mostly own the land they live on and the house they live in – Georgia does not seem to have anything like serfdom, tenant farming, or sharecropping. So for many Georgians, it is actually possible to eke out a very basic living without any external economic activity at all.

In addition, of the people who live in Tbilisi, many own property and open a small store of some kind right out of the building where they live. It seems like there are small convenience stores or produce stands on almost every block.

The second result of Georgian demographics is that the Georgians who live outside Georgia – being culturally family-oriented and expected to share one’s good fortune with others – work outside Georgia and send some of the money they make back home. If you have a brother who works in Moscow or Brooklyn or Germany, who has an extra hundred bucks to send you at the end of every month, then you’ve got a steady income of almost 200 lari per month – which for many is like having a second salary. Some Georgians who work abroad send home enough money for their families to buy houses and cars, benefiting in part from the favorable exchange rates.

I speculate that the Georgian ownership of property and the Georgian diaspora are related. I suspect that after the Soviet Union collapsed, lots of Georgians left the country, leaving a bunch of extra room behind. Because of the way the Soviet economy was organized, there weren’t large property-owning individuals or conglomerates who owned most of the property. In America, most property is owned by banks, corporations, and the rich. In Georgia, most property is owned by the people who live in it. So I imagine that after the fall of the Soviet union, there was a sort of housing anti-bubble. There still seem to be a lot of vacant housing units in the country, and a lot of buildings that are half-built, and not slated to be finished any time soon, because there’s no real money in real estate because there’s no real scarcity in the real estate market. And until the Georgian population expands to fill all the housing that’s already there, there won’t be any real pressure to build new houses or to create a robust mortgage market, which is probably good because mortgages have, on balance, probably damaged the US economy more than they have helped overall.

Another contributor to Georgian economic activity is private work. Teachers who make 200 lari a month can make another 500 lari a month giving private lessons, if they can find students for these lessons. Georgian English teachers can charge 15-20 lari per hour for lessons, and parents who want their children to learn English fluently will gladly pay these prices, because if their children get to go live or work or study in America or Europe, that’s potentially a lot of money that will be coming back into the family as a result. A Georgian who speaks English well can easily qualify for a decent job in Georgia, and a Georgian who has studied abroad can easily make five times what a regular Georgian might make. There are also a large number of Georgians who slap a “taxi” sign on their cars and become cab drivers, who may not necessarily report their employment or all their income to the government or statistical bureaus.

So, yes, Georgia has a very high official unemployment rate, and a relatively low amount of official economic activity, and its currency is not valued high against the dollar or euro which makes foreign goods extremely expensive, but despite these signs I wouldn’t describe Georgia as a poor country at all. Georgians also tend not to have a lot of personal debt – the credit system is not highly developed in Georgia, not to mention that, as I said, the vast majority of Georgians seem to live in homes that they or their families own outright, so there aren’t many mortgages – and so I would describe Georgians in general as better off than Americans in general, from a purely financial standpoint. I’d say Georgians are also probably happier with their lives, less stressed, less frustrated, and more hopeful than Americans. Americans have the advantage of a country with a more developed infrastructure and more modern conveniences, which means that even Americans who are financially poor are living with a fantastically high standard of living compared to much of the world (even the poorest Americans tend to have electricity and running water, for example) – but America has that standard of living because we have pushed the cost of it out to the rest of the world through military power and political hegemony. America is economically viable at this point only because of the principle of the ever-expanding empire, and I suspect that the current sour economy is only the beginning of the troubles America will soon be seeing.

Anyway, I’ve branched off topic. I have thousands and thousands of dollars of debt in the US, which means that my net worth is probably a large negative number. In that, I am a fairly typical American. The average American has a mountain of debt – from a car, a mortgage, a student loan, a hospital visit, a credit card, or from more than one of the above. The average American has seen the cost of living increase faster than wages for the last two generations. And so the average American may live with a lot more modern conveniences, but the cost of that is that the average American owes money, and lots of it, and our debts are growing even as our ability to pay them is shrinking. The average Georgian at least has a positive net worth, even if that net worth is small and measured in a weak currency.

So despite high unemployment, Georgians are doing okay for themselves. It’s not necessarily easy to make a living, but neither is there the mass starvation, famine, and pestilence that plague resource-poor third-world countries, nor is there the massive indebtedness that haunts the US and many other Western countries. Georgia is actually in a sweet spot where it is encouraging foreign investment that can grow the economy without having to necessarily change the cultural take on money and turn Georgia into a debt-reliant economy (although unfortunately the Georgian government has taken on a lot of foreign debt recently, with the purpose of attracting foreign investment, which may or may not work out…).

And as for all the BMWs and casinos – Georgia has its own issues with conspicuous consumption. I’ve heard the story of the Georgian man who buys a BMW with his life savings, perhaps even selling various other possessions, and then has no more money to even buy gas for this car, so every day he rolls it out of his garage, washes it in front of all the neighbors, rolls it back in, and shuts the garage door. He doesn’t use the BMW for anything other than a status symbol. The casinos with their big flashy lights could be mostly empty – again, the lights are just a status symbol, and would be kept on even if the electric bill pushed the casino financially into the red.

I’m not saying that there aren’t significant economic hardships in Georgia, or that being unemployed doesn’t suck for a host of reasons, but Georgia has a lot of growth potential and a great reserve of inner strength and a support network of Georgians around the world, and so I’m very optimistic about the Georgian economy while at the same time I’m realizing that things are not always what they seem, especially in cultures in which personal pride and status are considered more important than material conditions.

If Georgia succeeds in attracting foreign investment and tourism, and in educating its populace to increase the flow of outside money into Georgia and strengthen the clout of the Georgian diaspora, I think things will go extremely well for the country. The pitfalls, of course, would be for Georgia to emulate the US in terms of consumerism and indebtedness.

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Initially, the point of this post was going to be to examine how Georgians get by on very small average salaries with very high unemployment. I think I’ve covered those questions, albeit in a sort of scattered way. To sum up: help from family members at home and abroad; lots of subsistence-level agriculture; hidden income from private work; and property ownership – with a small segment of the population also benefiting from working for the government or for international corporations in Georgia. Oh, and I forgot to mention pensioners – there seem to be a lot of these.

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Will there be a Money in Georgia, Part III? Maybe. I have no idea what it would be about, but perhaps I’ll be inspired when I get back to the country. Until then:

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3 Responses to Money in Georgia, Part II: Georgian Economy

  1. Robin Carlisle says:

    Your observations of Georgia’s relationship with money was very well written. I’ve noticed so much of what you mentioned. Rings true for me.

  2. Anonymous says:

    Georgians are not better off than Americans financially! In fact it would be correct to say that Georgians are much poorer in comparison with Americans and any other developed country. Georgians bearly get by wtih this low incomes, they have to borrow money, work many obscure jobs and rely on their realtives for help.

  3. Pingback: Dollars and Laris | Georgia On My Mind

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