Capitalism can be referred to as a social system based on an economy with private ownership, whereas socialism means public or state ownership. The government of a capitalist society is a democracy. In contrast, even though the message is that society is ruled by the working class, it is actually a single political party, a small group of senior people, or – in most cases – a single individual who holds the most power.
It has been 25 years since Mongolia transitioned to capitalism from socialism, as other former Soviet Union nations and Eastern European countries did at the time. What this meant is that we replaced our single-party public governance and centrally planned economy with a multi-party system and a free market economy. We even changed the name of our country from the Mongolian People’s Republic to Mongolia, and removed the socialist theme from our national anthem.
However, in terms of the significance and meaning of this change, Mongolia has now become an abnormal democracy that is half-capitalist and half-socialist. Currently, our government is too involved in the economy and is trying hard to impose full control of the market. Our political parties, who obtain ruling power through democratic elections, are serving a few interest groups instead of working for the people. Hence, economic decline is a consistent occurrence in Mongolia.
Experts are actively discussing how Mongolians can overcome these repeated economic declines. Everyone agrees that the economy will not recover and livelihoods will not improve unless the root cause of the problem is identified and fixed. We are facing the significant risk of wasting another 25 years politicizing issues, changing governments, and deceiving ourselves while the more capable and educated of our people leave the country to live abroad.
Socio-economic conditions similar to those in Mongolia have also surfaced in other post-communist countries. In his book “From Totalitarianism to Defective Democracy”, Michal Kilma, a professor at Metropolitan University Prague, wrote about a culture of slaves, where people blindly serve the leaders of their political party in a post-communist space when civil society is weak. Such a culture weakens internal oversight within government organizations and makes their operations ineffective. Eventually, non-transparent businesses gain control of political parties and have government decisions made to serve their own interests. Professor Klima calls this phenomenon “capturing the state”.
Professor Klima states that once the state is captured by these non-transparent businesses, all government organizations become corrupt and fail in their responsibility to serve the people. This is what defective democracy is. A classic example of how non-transparent businesses can make government decisions their own can be read in my article “Erdenebilegism: A new phenomenon in Mongolia’s democracy”.
In the Czech Republic, political parties have continued mutually beneficial collaboration with non-transparent businesses, despite the partnership being harmful to society, and have transitioned into clientele-ism. Professor Klima believes that the government allowed the stronger political parties and non-transparent businesses to be given advantages by the state, and turned them into parasites that feed on the public’s wealth. Such parasites have consistently grown in numbers from election to election in Mongolia.
Professor Klima also says that the capturing of state has been conducted in a way where political parties were privatized from the bottom and colonized from the top. Privatization from the bottom refers to non-transparent businesses buying political party members and getting local governments under their control. Colonization from the top refers to senior management of non-transparent businesses imposing their control on political party leaders.
It can be said that these two processes have taken their own paths in Mongolia, defined by public awareness and culture. All of our political parties, including the Mongolian People’s Party (MPP) and Democratic Party (DP), have already been colonized. The only difference is that those who colonized the political parties are the political party leaders themselves, who own the non-transparent businesses driving political agendas. These people have imposed their control on their political parties through corruption.
Regardless of where it started, Mongolia’s non-transparent businesses are flourishing and they are capturing the state. As soon as they are elected, these bought politicians instantly forget what they promised to deliver and start appointing their relatives to seats in the government after creating new ministries and positions. It results in non-transparent governance. What they also do is replace people who were hired by the previous government with their own “slaves”, who work only for them. Political party leaders collect funds in the guise of donations, and keep most of them in their personal accounts. In return, they repay their debts in many ways, such as distributing government positions and manipulating public tenders.
The Mongolian people now understand that these economic declines trace back to political parties rather than the economy. Because political party financing is undisclosed and fake reports are submitted, the parties are able to collect huge donations and become the godfathers of non-transparent businesses.
As soon as the political parties these godfathers belong to win an election, they are able to more easily steal public funds and increase the number of billionaires born from the government. As they have reduced the number of internal financial sources to steal from, the government is now pursuing loans internationally, implementing pipe dream programs, and embezzling funds through the financial and economic regulatory organizations that are supposed to provide oversight. The judiciary branch is also controlled by these godfathers. Therefore, despite crimes of corruption being discovered, the damages are never recovered. What they do is issue a sentence of a few years and then issue pardons to the culprits shortly after.
My article “Fakestan” discusses how the people are paying for the economic losses that were caused by these parasites feeding on public funds.
WHEN WILL WE OVERCOME DECLINE?
The economy is developed by the private sector, not the government. Livelihoods are improved by the people themselves, not the government. The government is not an employer, but an institution that has the duty to provide equal opportunities for the private sector and allow them to create jobs.
The number of state-owned companies is rising in Mongolia, and they are receiving more soft loans from the government while the deficits they run are being made up for by the public funds. This means that the government is forcefully doing what the private sector should do, and is spending its capital on the parasites instead of focusing on more critical items. The government is now increasingly involved in the economy, setting prices for consumer products and imposing restrictions. It is neither possible nor sustainable to continue the apartment mortgage program, price stabilization initiatives, and the agreement to fix the price of fuel. On top of that, the costs to continue these programs is too high.
Market equilibrium is not achieved by decisions made by the government, but a system involving real prices, profits, and costs. It is only economies following these principles that experience the least amount of problems.
Mongolia will not be able to overcome its economic decline without making structural changes to our economy, allowing the market to set prices and making public governance transparent.
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