Institutions After Communism: Georgia's Reforms

Economists increasingly concluded that institutions, such as courts, police, tax authorities and property registries, were key to whether transition economies prospered. Where institutions were weak and corrupt, markets struggled.

Corruption in the transition

In many former Soviet countries, the 1990s brought widespread corruption. Officials demanded bribes for licences, police extorted drivers, and courts could be bought. This raised the cost of doing business and discouraged investment.

Georgia’s reforms

Georgia, a small country in the Caucasus, became a well-known case of rapid institutional reform. After the Rose Revolution of 2003, the new government:

• Dismissed the traffic police, known for corruption, and replaced them with a new, better-paid patrol police force in 2004.
• Simplified taxes and cut the number of taxes.
• Streamlined business registration and licensing.
• Digitised public services and created public service halls where citizens could obtain documents quickly in one place.
• Prosecuted corrupt officials.

Transparency International and World Bank surveys found dramatic falls in petty corruption. Georgia rose sharply in international rankings for ease of doing business, and people’s experience of bribery in daily life dropped substantially.

Limits

Critics noted that reforms were driven by a strong executive, sometimes at the expense of judicial independence and political freedoms. Economic growth improved but poverty and unemployment remained significant.

The lesson

Georgia’s experience suggests that rapid improvements in institutions are possible with strong political will, but sustaining them requires checks and balances.