CHAPTER 2. THE SOCIAL COST OF REFORMS

The conviction, taking root in the public mentality of Armenians and reinforced by the ideology of sustainable human development (SHD), outline that reforms should be aimed at specific social and economic goals with the involvement and support of the general public. However, economic development cannot be achieved by continual depletion and redistribution of the economic potential created by previous generations and by the expulsion of the real economy by the speculative sector. Ultimately, prosperity is grounded in economic growth oriented towards meeting the real needs of the public.

Initial reforms were accompanied by plummeting standards of living, mass unemployment, impoverishment of the majority of the population, extreme social polarization and the deteriorating demographic situation and emigration. Personal savings of the population were entirely depreciated through hyperinflation. At the initial stage the standards of living went down dramatically; there was a ten-fold decrease in the consumption of goods and services and the monthly per capita income plummeted to 5 USD . Emigration of the population peaked in 1993 because of the hardships of life. The pre-reform achievements in the social sphere _ free education and public health care, the genuine right to paid work and leisure, are gone. Labor relations are not regulated in the private sector, with trade unions being on the sidelines. Human capital has been squandered, the former relatively secured intelligentsia, has been in fact seriously endangered.

The most important phase of reforms, privatization of state property, was carried out with the violation of social justice. Though the population was formally involved in the process and was given privatization certificates, in compliance with the equality principle, in reality the impoverished population, having lost its earlier savings, sold the certificates on the black market at extremely low prices and remained (like before) alienated from property. Only 10% of the population, who retained and accumulated certificates, exercised the right to privatization.

The State, in fact, distanced itself from managing the privatization process, failing to conduct any informational campaigns for the population, establish investment funds or a market for certificates as securities. Neither were new owners required to provide guarantees or business plans. Flagrant violations were committed. Hopes that the proceeds from privatization would significantly increase the revenues of the national budget were also dashed: real revenues turned out to be 10 times less than those anticipated. All these shortfalls placed severe constraints on the development opportunities of the RoA economy.

The individual has been left alone in any attempts to adapt to new realities without any assistance from the State. The population has its doubts as to the legitimacy of reforms as a guideline for development.