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The Georgian government has been forced to withdraw its controversial “foreign agent” law after days of mass protests against what many saw as Russian-inspired legislation which would limit press freedom, making its chances of ever joining the European Union near impossible.
Over two nights this week, thousands of protesters have packed the streets of Tbilisi demanding “No to Russian law”. Riot police used teargas and water cannons. More than 60 people were detained. But the scale of protests led the ruling Georgian Dream party to back down, saying in a statement it would “unconditionally withdraw the bill we supported without any reservations”.
The bill, which had only recently been introduced by the Georgian government, would prevent non-government groups and the media from taking more than 20% of funding from abroad. It is similar to a law passed in Russia in 2022 which has been used to crack down on media freedom.
Georgia was once the darling of the international community – a shining example of how a post-Soviet country could overcome a legacy of corruption and authoritarianism, and come back from the brink of state failure.
But Georgia’s relationship with the west started to change after billionaire businessman, Bidzina Ivanishvili – Georgia’s richest man – came to power in 2012 (and holds de facto power as the leader of the Georgian Dream party, despite officially stepping down in 2013). Initially Ivanishvili appeared to be trying to build good relations with the west. But he did so while also maintaining close relations with Moscow on the grounds that this was critical to Georgia’s security.
Experts I interviewed, during a visit to Georgia in late 2022, claimed that Ivanishvili has no intention of ceding power. Thus, remaining friendly with Russia serves this objective better than trying to please the west – which has always come with strings attached such as adhering to human rights and ensuring the integrity of elections.
Ivanishvili may also be compromised by the Kremlin. He was reported to have sold all his Russian assets in 2012 but last year Transparency International reported he still owns businesses in Russia through a network of off-shore companies as well as through his family and other representatives.
The tycoon is thought to owe Russia for his surprise election victory in 2012, a victory made all the remarkable by his refusal to criticise Russia, which had invaded Georgia just four years previously.
The obviously pro-Moscow leaning of Ivanishvili and his Georgia Dream Party has been a source of growing discontent among ordinary Georgians. Many Georgians feel their government has little interest in protecting the country from Russia’s political and psychological aggression, and possibly not even military aggression.
There is also widespread concern among Georgians about what they perceive as the government’s lack of commitment to true democracy. A report from the Organisation for Security and Cooperation in Europe said that while elections had been assessed as competitive and fair, “pervasive allegations of pressure on voters and blurring of the line between the ruling party and the state reduced public confidence in some aspects of the process”. Journalists and the NGO directors I interviewed claimed that they were constantly being spied on by the regime.
Regardless of whether Ivanishvili is a Russian puppet or merely shares the Kremlin’s political vision, Russia has gained more leverage over Georgia under his control.
But the protests show the extent to which the government’s clear pro-Russian leanings have outraged much of the Georgian population. With Russian troops only 25 miles away from the capital, Tbilisi, many fear that Georgia could share the same fate as Ukraine – especially if it looks as if a government of a different stripe could continue to move the country closer to the west by joining the EU and continuing as a candidate member of Nato. The appetite for such a shift is clear – a survey conducted in August 2022 found that at least 75% of Georgians want to join the EU, and only 2% are pro-Russian.
And anti-Russian sentiment has only increased with the influx of Russians fleeing Georgia since the invasion of Ukraine. There was even an online petition calling for Russians to be allowed to stay in Georgia for only three months.
Historically Georgians have shown they are willing to take to the streets to protest what they see as injustice: whether to protect the rights of the gay and lesbian community, to reject what they see as electoral fraud or to demonstrate against police brutality and corruption.
The protests leading to the “Rose Revolution” in 2003 brought an end to the country’s Soviet-era leadership and led to a break from Moscow. And the country’s political leadership also has a track record of making concessions in response to citizens taking to the streets. This could be seen in 2019 after months of protests forced the Georgian Dream-led government to promise electoral reform.
But Moscow’s man still holds the reins of power in Tbilisi and his government’s attempt to pass the “foreign agent” law is further evidence that Russia will continue to influence and inspire some of the countries it considers to be in its orbit.
The failure to pass the reform, however, suggests there is a limit to Moscow’s power in Georgia. Much may now hang on the outcome of Vladmir Putin’s war on Ukraine.
Natasha Lindstaedt does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
The UK government has not yet resolved the thorny issue of ongoing public sector pay disputes, despite the fact that these workers are suffering much more from the cost of living crisis than their private sector counterparts. The government is worried about wage increases pushing up inflation that is already sky-high, but recent data shows that giving these workers more pay is unlikely to have that effect.
In the year to October 2022, private sector pay increased by 6.8% compared with only a 2.9% increase for the public sector. This disparity has lead to widespread industrial action in the UK in recent months. On a longer-term basis, a growing pay gap is contributing to acute labour shortages, which is seriously affecting the delivery of public services such as healthcare and education.
Voters largely support public sector workers’ current industrial disputes. When a recent poll asked the public who they thought was responsible for the nurses’ strike, nearly half (49%) of respondents blamed the government and only 20% blamed the trade unions. Another poll showed 55% of the public support teachers’ current pay dispute – up from 33% recorded in a similar poll ten years ago. Voters seem to see years of falling real wages for public sector workers as a problem, even if the government is not acting to raise them.
So why is the government refusing to offer a better pay deal to these workers? It argues that it is merely following the advice of the various pay review bodies which make recommendations on pay in the public sector. However, these bodies are not independent of government. For example, when the government imposed a pay freeze for workers earning more than £21,000 a year in 2011 and 2012, these bodies followed this lead by making no recommendations on pay for staff on higher salaries.
Since industrial action first started to gather speed last year, concerns have been raised about a wage-price spiral causing entrenched inflation. This happens when rising prices prompt increased pay settlements, which in turn produce further price rises, wage increases, and so on. It happened in the UK in the 1970s when, similar to now, the rate of unemployment was very low.
Indeed, the unemployment rate is key to this discussion. In the 1950s, a New Zealand economist called A.W. Phillips published research showing an inverse relationship between wage inflation and unemployment in the UK that had existed for nearly a century, from 1861 to 1957. During this period when unemployment was low, wage inflation was high, and vice versa. Since then the Phillips curve, as it has become known, has been widely used to measure price inflation.
If this relationship still holds, it would mean that the current low unemployment level of 3.7% could trigger a wage-price spiral, particularly if public sector pay is increased. So it could be argued that the government’s refusal to raise public sector pay is a strategy to control inflation.
But the problem with this idea is that the Phillips curve no longer works in Britain, as the chart below shows.
Unemployment versus inflation in the UK (2001-2022)
Using monthly data over the period from 2001 to 2022, this chart shows the relationship between inflation, as measured by changes in the consumer price index, and the unemployment rate. Below an unemployment rate of about 4%, there appears to be a steep negative relationship between joblessness and inflation, in line with the original Phillips analysis.
Read more: An economist explains: What you need to know about inflation
But although this is happening right now – inflation is very high – it is the product of supply-side influences, not wage inflation. The UK (alongside many other countries) has been plagued by supply-side inflation in recent years due to the effects of Brexit, the pandemic and the war in the Ukraine on the supply of goods and services. Recent increases in energy costs in particular have really boosted inflation over the past year.
At levels of between about 4% and 7% unemployment in the above chart, there is essentially no relationship between inflation and unemployment. The latter is expected to rise in 2023 as recession conditions set in, which means that raising wages in this situation will not affect inflation.
When unemployment exceeds 7%, inflation appears to increase alongside it, producing what is often described as “stagflation”. This occurs when prices and joblessness increase together – a difficult combination for any economy to recover from, since it produces low growth.
Read more: 1970s-style stagflation now playing on central bankers' minds
This indicates that reasonable pay settlements in the public sector to compensate for falling real wages over the years could easily solve the present impasse without triggering a wage-price spiral.
This finding is reinforced by the widespread expectation that inflation has now peaked and will start to fall over the next few months. Indeed, the OECD is currently forecasting that inflation will fall quite rapidly across the world.
And for Britain in particular, it’s also worth remembering that public sector employment is only a relatively small percentage of total employment, further reducing the prospects for a wage-price spiral caused by public sector pay rises. Private sector employment in the UK exceeded 82% of the workforce in 2022, implying that “catch-up” wage settlements to compensate for declining real wages in the public sector would have much less impact on total labour costs than they would in the private sector.
All in all, the current government intransigence on public sector pay looks like it’s based on both bad economics and bad politics. The former because there is little prospect of wage inflation at the same time as there is a serious labour shortage in the public sector. The latter because many voters think the government is basically hostile to the public sector.
This view could strengthen as the general election approaches. With the state of the NHS, in particular, set to loom large in voters’ minds, this does not seem like a winning strategy.
Paul Whiteley has received funding from the British Academy and the ESRC.
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