After the breakup of the Soviet Union in 1991, the central Asian nation of Uzbekistan became independent. Like many other ex-communist states, Uzbekistan started moving from a planned economy, where the government controls the means of production, to a market economy, where state control on the means of production and trade are reduced or removed completely. However, compared to many other ex-Soviet and ex-communist states which became capitalist in the 1990s, such as Poland and Kazakhstan, Uzbekistan has been slow and cautious on its path towards capitalism. State regulations on prices and production were removed very gradually, with most of these restrictions still in place as of 2017, a full 26 years after independence.
Much of this hesitancy can be attributed to Uzbekistan’s dictatorial president, Islam Karimov, who from 1991 to 2016 used the economy as a tool for retaining control over the Uzbek population. For example, during his time in office, up to 2 million Uzbeks were recruited each year into forced labour to work on the country’s vast cotton plantations, though this number is now declining. Karimov also used his control over the economy to give his political allies economic incentives, which denied the Uzbek people the fruits of their labour. Although Uzbekistan’s general economic situation has continued to improve under the new president, Shavkat Mirziyoyev, unemployment remains high. Similar trends have been observed in surrounding Central Asian nations.
Central Asian Paths Towards Capitalism
After an initial period of volatility immediately post-independence, the countries of Central Asia took, in general, two main paths towards a market economy. Kazakhstan and Kyrgyzstan took more aggressive steps towards privatisation, while Turkmenistan and Uzbekistan took more conservative steps. In a different case, Tajikistan’s progress towards a capitalist system was slow; however, this was because of the horrifying Tajik Civil War from 1992 to 1997.
A phenomenon in economics known as the resource curse means that many resource-rich countries end up poorer financially and are more likely to remain so under dictatorships. This is because the ruling elite in existing dictatorships often takes the profits from resource extraction, which further entrenches their grasp on power. Thus, the continued economic woes of some Central Asian economies can be explained by the fact that most economies in the region are resource-based. For example, “mining, quarrying, and oil and gas are the leading industries of Uzbekistan’s economy.” Although Uzbekistan’s gross domestic product (GDP) continues to grow, the resource curse has meant that its level of unemployment is also on the rise. This link is further supported when looking at Kazakhstan’s (an economy dependent on fossil fuels) GDP, which rose throughout the 2000s but fell after 2014 when global oil prices dropped.
Dictators and the Economy – A Tool for Control?
Many dictators in Central Asia have used the economy as a tool for control. In Uzbekistan, ex-dictator Karimov used his control over the economy to award oligarchs loyal to him with business incentives. The corruption associated with the Karimov regime, which has hampered economic growth in Uzbekistan, has become a fact of life. For example, some Uzbek citizens have described paying bribes as being “expected.” In addition, Karimov’s own wish to retain power meant that his regime controlled exchange rates when the Uzbek currency, the so’m, started to decline in value after two separate downturns in cotton prices in 1996 and 2008.
Similar patterns have been observed in neighbouring Turkmenistan and Kazakhstan. In Turkmenistan especially, government control over exchange rates of the Turkmen manat to the U.S. dollar has led citizens to depend on government-subsidised food, which is often ten times cheaper than privately sold groceries as high exchange rates have made imports prohibitively expensive. This allows the government to cut off food access at any time it likes, which the government has used to control at-risk populations such as those indebted to utility companies in the country, further alienating them.
The Future of Uzbekistan Under Mirziyoyev
After Karimov’s death in 2016, Uzbekistan’s economy has developed significantly under Mirziyoyev. Mirziyoyev has simplified the process of starting a business in Uzbekistan, removed many Karimov-era controls on the economy, such as “untether[ing] the [som] from its U.S. dollar peg,” and abolished “restrictions on the amount of foreign currencies individuals and companies can buy.” These changes have also benefited the Uzbek people, as working conditions improved under the new economic reforms, and forced labour rates, particularly in cotton picking, have dropped in the past few years. As energy and cotton prices around the world continue to rebound from their pandemic lows, the resource-dependent economy of Uzbekistan will also benefit, and economists have forecasted that the Uzbek economy may grow 5.0% in 2021.
Mirziyoyev will still have to face many challenges on the path towards bettering Uzbekistan’s economy, such as high unemployment (officially 9.1% before the pandemic, and as of 2020, 13.2%) and becoming more independent from resources. However, as many of these problems are caused by bureaucratic inefficiencies or corruption, easing them will also help with the economic state of Uzbekistan.