My time in newly independent Azerbaijan

An interview by Cavid Ağa

First published at https://cavidaga.com/interview-with-tom-lines/ on July 11th, 2019.

(I have made a few minor sub-edits and indicate them with square brackets.)

Did you have any opinions about Azerbaijan prior [to] visiting?

Nothing firm.  I worked for a few weeks in Russia (mainly Moscow) in the spring of 1992, and when I later told my Russian friends that I was going to Azerbaijan their typical reply was, ‘Тебе не страшно?’ (‘Aren’t you afraid?’).  So before going there, I bought a wallet with a chain which attached it to my clothes, as a precaution.  In general it has been very useful and I still use one like it (because of it, I always know which pocket my wallet is in!).  But I did not require it for security in Azerbaijan (or anywhere else).  What those friends said to me revealed more about Russian prejudices than the reality I found in Azerbaijan.

As for politics, I had followed the break-up of the USSR for my previous job in 1990-91, and Soviet politics generally for over 20 years before that, and I was familiar with the specifics of several countries, including the Baltic states and the Ukraine as well as Russia.  In the previous two years I had made working visits to all of those countries as well as Belarus and Kazakhstan, but nowhere in the Caucasus region, and so I knew very little about what I discovered to be a very interesting situation in Azerbaijan.

How would you describe [the] socio-political situation during your stay?

Very unstable.  I arrived in September 1992, not long after President Mutalibov was overthrown and replaced by President Elchibey of the Popular Front, and then I lived in Baku through the worst of the war in Dağlıq Qarabağ [Nagorno-Karabagh].  I was evacuated back to Brussels during Heydar Aliyev’s slow-motion coup d’état the following summer, and returned for a few months before finally finishing my job there in about November 1993.  Despite the military reverses and political turmoil Baku never felt like a city at war or in serious crisis, but it also lacked the fervour one might expect in a small country that had gained independence for the first time in 185 years.  The atmosphere was quiet – almost too quiet in the circumstances, I thought – but subdued.  I put that mood down to the defeats in the war, which were reflected in the sad visits that people made to the memorials to fallen soldiers in the city centre.  But falling living standards [amid] economic and political confusion after the collapse of the old system may have contributed as much to it too.

Do you remember any interesting events that you found odd?

I’m sure there were lots of them!  That’s why I loved being there.  After all, I was in a distant country for the first time, I did not know the national language and the country was going through a very difficult time of change.  Perhaps the oddest thing was that, as it seemed to me, no foreign visitor would have guessed the country was at war if they had not known it.

Two other things occur to me right now.  One was the experience of working in an office in part of the former Soviet Union for the first time, because the arrangements and even some of the tools and equipment were very different from what I knew.  For example, the secretaries and typists who used to play a big role in Western office life were entirely absent, except for the occasional ‘референт’ [‘referent’], as were their accompanying skills such as touch-typing.  The same for some basic stationery, such as sticky tape: papers were attached with pins or glue or string.  And when the head of my office once wrote an important letter to a senior official, he showed me the draft.  I was struck by how little it said and how much space it took to say it, filled with flattery for the official.  That revealed something to me about the nature of official relationships, at least within the civil service, in what until just recently was the USSR: back home, business letters and memoranda deal with facts and generally in as few words as possible.  But in the outgoing culture facts and opinions were dangerous to set down in writing.  That, at least, is how I interpreted it.

My final oddity is a little incident in December 1992.  I returned to Baku after a couple of weeks at home feeling rather low, being in an unfamiliar place with a new job which had not been set up well by my employers.  The first morning I flagged down an old [two-door] Zaporozhets car for a lift to the office (under the system of the time in which private car owners used their cars as taxis to earn some money).  I had to sit in the back seat as the front passenger seat had been removed to make way, as far as I can remember, for a load of eggs.  My spirits immediately rose with that reminder of people’s lively spirit of improvisation and ‘making do.’

What about your contacts with dominant political figures? Have you personally met Elchibey or elder Aliyev? How would you describe them?

My relations were not that high up.  Unfortunately I forget the names now, but the most senior people I met were the acting Prime Minister (Ali Masimov?) and the President’s chief economic advisor (Mammedov?) in early 1993, in Elchibey’s time.  Meetings with the latter were due to my own work, while with the former I was an informal interpreter for a couple of EU officials who were visiting in connection with humanitarian aid.  But I do not remember very much about the meetings or what the personalities were like.

How was your relation with locals? By what means did you communicate with them? How many of them spoke English?

My relations with local people were good, conditioned by the strong Azeri and Muslim traditions of hospitality, which would always have protected me from any harm that might arise (but in fact never did).  At that time there were very few people from the western world in Baku and we could be immediately identified as such from our style of dress and so on.  I made particularly good friends with a young man in our office and his young family, who I visited several times.  By training he was a physicist but he had moved to that job like many people who had to change career paths suddenly in that era (while others simply lost their careers); he was very intelligent and interesting to talk to.  Very few people spoke any English but it did not matter because I spoke good Russian.  I tried to learn Azerbaijani but did not get very far because not only at work but in the bazaars and everywhere else everyone knew Russian, so it was not easy to try out the little Azeri that I learnt.

Did you monitor events in Azerbaijan after your departure? If you did, how would you evaluate [the] Western media’s view of early Azerbaijan? Positive? Negative? Curious?

I have remained curious about Azerbaijan, but at a distance.  When I returned home I had to look for other work somewhere, and the next jobs I did, in the first half of 1994, were in the Ukraine [and] Serbia/Montenegro.  In the end by 2000 I worked for at least a short time in every ex-Soviet country except Armenia, as well as Mongolia and some countries further west, so Azerbaijan was only one of many countries that I became acquainted with.  However, it was special as my introduction to a very interesting series of experiences.  So I have fond memories of the place.

As for the Western media, I would describe their attitude as incurious but also negative, in spite of that lack of knowledge.  The USSR had always been seen through Moscow’s eyes and the wider world had little understanding of its many complexities.  To this day, that Russian viewpoint often colours the understanding of the Ukraine, let alone smaller and more distant countries.  In England, the famous Azerbaijani linesman in the 1966 football World Cup Final was until very recently remembered as Russian: people did not distinguish between Russia and the USSR.  The large Armenian diaspora (especially in the USA and France), Azerbaijan’s Turkic and Muslim associations and the rather closed nature of Azerbaijani society (with almost no contact with the world outside the USSR) all led to further prejudices and misunderstandings, and probably still do to some extent.  I find all of that very regrettable.

Something of this arose only this spring with the Armenian footballer Mkhitaryan’s refusal to play [for Arsenal] in the Europa Cup Final in Baku.  English journalists made no attempt to understand the politics of the situation, or what Mkhitaryan had himself done to earn Azerbaijan’s displeasure.  They just assumed that he was right and the Azeri authorities were wrong – even though, as far as I could see, they behaved very correctly throughout the affair.

What do you think about current situation of Azerbaijan? How much did it change?

Since I have not visited Azerbaijan since 1993, I find it very hard to say.  While I was there I sympathised strongly with the Popular Front government in spite of its failings.  Alongside it, I was impressed by the deep roots of the country’s independence movement when I found out about it, with (as I understood) working class [people] much more involved than in other Soviet republics, where the demands for political freedom and independence came mostly from middle-class intellectuals.  Naturally I was disappointed by Aliyev’s return to power, even though he was a very experienced politician and managed to restore order in an unruly situation.  I remain saddened by authoritarian rule there, but enormously impressed when I read of the determined spirit of some activists and journalists in spite of it all.

Would you like to visit Azerbaijan again?

Of course!  I have fond memories of a small, remote country trying to make its own way in the most adverse circumstances.  A few years ago the England football team played a World Cup qualifying match in Baku and I thought about going there for it, but unfortunately it wasn’t a practical proposition.  Baku is a beautiful [and historical] city and I would love to see it again, although it was in a very poor condition after several decades of neglect at the time.  (I am a keen student of architecture.)  From everything I hear it has been transformed in the intervening period, with some world-famous new buildings that I would love to see.  I would also love to try the fresh sturgeon, the pomegranates, the wonderful fruits, nuts and vegetables, Azeri plov and so many other delicacies again!

Helping countries to tax more

Tax havens and tax dodging by big corporations and the super-rich have generated much anger in recent years.  Most of all, they are a problem for developing countries, and they have long been recognised as such.

However, the biggest international push on developing countries at present is simply to raise more tax.  The stated purpose of this is to contribute to the huge costs[1] of the Sustainable Development Goals, which were approved by the United Nations General Assembly in September 2015.

But advocates of developing-country tax reform say more taxation is also necessary for what they call state-building.  They point out how few people in many countries actually pay direct taxes, and say this weakens accountability between a country’s government and its population.  An example is Tanzania, where in 2008 there were only about 400,000 names in the Taxpayer Identification System for a population of over 45 million,[2] whilst in 2010 under 400 large taxpayers (mostly companies) contributed about 80 per cent of government revenue.[3]

The Addis Tax Initiative

In July 2015 the aspiration of higher levels of taxation was embodied in the Addis Tax Initiative (ATI), which was launched at the third UN Financing for Development (FFD) conference in Addis Ababa, Ethiopia.  Its founding declaration included three separate commitments: for donor countries, aid recipient countries and both groups of countries together, respectively.  It is the first of these that really mattered because it alone provided a target: not to increase taxes, but to double by 2020 the value of foreign aid projects in this area (mainly to help administrative capacity-building).

But this did not go down well in all quarters, as tax justice campaigners saw it as a diversionary tactic.  Their demands were not about the SDGs but for new global tax rules to be determined by all countries together – not just the rich ones, which were already developing rules under the auspices of the Organisation for Economic Cooperation and Development (OECD).

Forced financial inclusion

Besides, in many countries – and not just the very poorest – most people have insufficient income and wealth to allow for any significant increase in their tax payments.  So where reforms concentrate on taxes on income or consumption, they can look like a form of forced inclusion in the financial system. That is not unlike the taxes used by colonial administrations to force people on to the labour market.

If it succeeds in increasing tax revenues, this aid could also enable developed countries eventually to cut back on aid to developing countries – or alternatively, to reduce the latter’s unhealthy dependence on aid, depending on your point of view.  That dependency is huge: for example, in 2017 net receipts of foreign aid were equal to 71 per cent of central government expenses in Mali and 76 per cent in Mozambique, while in Malawi they exceeded government expenditure by 28 per cent.  Where few people pay direct taxes, this effectively makes governments more accountable to foreign donors than their own citizens.

Nevertheless, most developing countries’ tax revenues are well below the levels found in developed countries.  Among the ATI’s developing-country members in 2016, tax was worth on average just 15 per cent of gross domestic product (GDP), while the average in the OECD countries was 34 per cent.[4]

Old warnings about revenue

There were warnings about this during the period of decolonisation.  In 1963 the economist Nicholas Kaldor wrote this advice (using the terminology that was current at the time):

The importance of public revenue to the underdeveloped countries can hardly be exaggerated if they are to achieve their hopes of accelerated economic progress…  foreign aid is likely to be fruitful only when it is a complement to domestic effort, not when it is treated as a substitute for it.[5]

But most newly independent countries were more interested in nation-building – creating a sense of nationhood and replacing European officials with national ones – than state-building.  Foreign aid was readily presented as a way not only to pay for services but design them, and it filled the revenue gap instead.

At best a guarded welcome

The jargon name for this push for more taxation is Domestic Resource Mobilisation (DRM) and as a broad aim, it is widely shared among donors.  However, it has met, at best, a guarded welcome from potential beneficiary countries.  In 2016 there were 98 developing countries with DRM projects in place, but by now only 23 have joined the ATI itself.  The ATI’s monitoring report for 2015 commented drily, ‘Other countries have refrained from joining as their current political priorities lie elsewhere too or the topic of domestic revenue mobilisation is considered a highly sensitive issue for such a visible commitment.’[6]

There has been foreign aid for improving tax administration since at least 1985: Tanzania has been in more or less continuous receipt it ever since.  Most such aid goes to countries which – like Tanzania – have always been major aid recipients, and not necessarily those that need it most.  But even there it has been very patchy.  Thus, in 2016 Ghana received US$18 million worth of aid for DRM, but Ethiopia – one of Africa’s largest countries – got no more than US$1.8 million and its little neighbour, Djibouti, none at all.  The US$11 million worth of this aid received by Tanzania In 2015 came in the form of 13 projects from seven donor countries – Canada, Finland, Germany, Japan, Norway, the UK and the USA.

Even without such an evident risk of duplication, it is not clear whether this aid is effective, even in its own terms.  After 30 years of such assistance, Tanzania’s tax revenue was still only worth 12 per cent of its GDP in 2016.[7]

Sidestepping the issues

However, an urgent need to tackle corporate tax dodging remains.  In some DRM programmes (such as Norway’s) it is one of the ways pursued to raise more revenue.  But as long as the rules of corporate taxation are determined by the countries that transnational corporations come from, it will fall short of that need.

The OECD’s own package of measures to tackle tax dodging was ‘delivered’ in October 2015 and developed by 44 countries, including every member of the OECD and the Group of 20[8] plus an expanded ‘inclusive framework’ of 85 more.[9]  Taken together, these 129 countries are said to represent ‘more than 90% of the world’s economy and more than 75% of the world’s population.’[10]

But the final decisions were left in the hands of the 44 richest and most powerful countries.  Meanwhile, the problems are most acutely felt precisely in those other countries which have a quarter of the population but only 10 per cent of the world’s output.  Above all, it is that quarter of the planet that the SDGs were set up for, and their voices need to be heard.  The ATI effectively sidesteps these issues and can even be seen to perpetuate a global system that is inequitable and flawed.


[1]  Estimated at US$5-7 trillion per year until 2030.  See United Nations (2018), ‘Financing for SDGs: Concept Note,’ New York, www.un.org/pga/72/wp-content/uploads/sites/51/2018/05/Financing-for-SDGs-29-May.pdf (March 2019), citing UNCTAD, World Investment Report 2014, Geneva.

[2]  Fjeldstad, O.-H. (2013), ‘Taxation and Development: A review of donor support to strengthen tax systems in developing countries,’ Helsinki: UNU-WIDER, Working Paper no. 2013/010, www.wider.unu.edu/sites/default/files/WP2013-010.pdf (March 2019), p. 10, citing O.-H. Fjeldstad and K. Heggstad (2011), ‘The Tax Systems in Mozambique, Tanzania and,Zambia: Capacity and Constraints,’ Bergen: Chr. Michelsen,Institute.

[3]  Fjeldstad (2013), p. 10.

[4]  Addis Tax Initiative (2018), ‘ATI Monitoring Brief 2016: ATI Commitment 2,’ Berlin: International Tax Compact, www.addistaxinitiative.net/documents/2016_ATI_Monitoring_Brief_2.pdf, p. 8; K. Markensten (2018), ‘Sweden’s Development Support to Tax Systems,’ Stockholm: Expert Group for Aid Studies (Expertgruppen för Biståndsanalys): April, https://eba.se/wp-content/uploads/2018/04/Taxes-Markensten-Webb.pdf, p. 9; and Ministry for Foreign Affairs of Finland (2018), ‘Finland’s Development Policy Results Report 2018,’ Helsinki: https://um.fi/documents/35732/0/UM+KPR+2018+ENG+WEB.pdf/944cf817-9d4a-43ca-07a7-2aebd6053801, p. 37 (all visited in March 2019).

[5]  Kaldor, N. (1963), ‘Will Underdeveloped Countries Learn To Tax?,’ Foreign Affairs, Vol. 41, No. 2 (Jan., 1963), pp. 410-419, www.jstor.org/stable/20029626 (January 2019), p. 410.  Cited in Fjeldstad (2013), p. 2.

[6]  Addis Tax Initiative (2017), ‘ATI Monitoring Report 2015,’ Berlin: International Tax Compact, www.addistaxinitiative.net/documents/Addis-Tax-Initiative_Monitoring-Report_2015_EN.pdf (March 2019), p. 26 (emphasis in the original).

[7]  Addis Tax Initiative (2018), p. 9, Fig. 2.

[8]  OECD (2017), ‘Inclusive Framework on BEPS: Progress report July 2016-June 2017,’ www.oecd.org/tax/beps/inclusive-framework-on-BEPS-progress-report-july-2016-june-2017.pdf, p. 3 (March 2019).

[9]  These are listed by the OECD at www.oecd.org/tax/beps/inclusive-framework-on-beps-composition.pdf (March 2019).

[10] Fung, S. (2017), ‘The Questionable Legitimacy of the OECD/G20 BEPS Project,’ Erasmus Law Review, No. 2, December, doi 10.5553/ELR.000085, www.erasmuslawreview.nl/tijdschrift/ELR/2017/2/ELR_2017_010_002.pdf, p. 76 (March 2019).

Why I’m a centrist

I have always voted left of centre – never Conservative.  I stood as a parliamentary candidate in 2005, opposing a Liberal Democrat MP.

However, in my views on economics you could say I am a centrist.

Does this mean I stand somewhere between the Tory chancellor, Philip Hammond, and the Labour Party’s John McDonnell?  No, my opinions on economics are much closer to McDonnell’s.

I have reported on financial markets and studied both economic development and the USSR – I visited it for the first time in 1971.  I saw that the complete repression of markets there was obviously excessive, even though central planning had produced remarkable results in industrialising the country between about 1930 and 1960. But it was accompanied by gross inefficiency, poor quality, a lack of innovation – in short, pretty well everything that market evangelists say of state control in the economy.

So I do think that markets are best?

No. Market evangelists make the same mistake as the Bolsheviks and Stalinists did – or a mirror image of it.  Their economic policies over the last 40 years have not been crowned with success either.

For the old dichotomy of ‘state v. market’ is false.  A good economic policy makes use of both the state and the market.  It is futile to try to make one do what the other is better at.  The difficulty often lies in knowing which is better for a particular purpose, or what combination is best.  But ever since at least the 1980s, the balance in both domestic British and international policymaking has swung far too far towards the market.

It seems to me that there are in fact three guiding principles of economic organisation:
Hierarchy, or a pyramid of command which takes authority from above. Typical of state structures, especially undemocratic ones like the Soviet Union, it is also how most companies are organised.
Horizontal, democratic structures, taking authority from below or alongside – cooperatives and mutual societies, as well as decisions made by elected councils and governments.
Decentralised monetary exchange, operating through markets.  Relations of economic power are mediated through changes in price.

Each of the three has its place, and more than one of them often combine effectively: education was traditionally organised on a mixture of the horizontal and vertical principles, to which the market idea has been increasingly added recently.  All three principles must be described and analysed on equal terms, if economics is to lay any claim at all to scientific objectivity and rigour.

Rather laughably, conventional economists do make that claim; but their actual language does not bear it out.  Mainstream economics only takes a serious interest in one of the three elements but, more or less explicitly, presents that element as the ideal.  Non-market methods are called ‘distortions’ or ‘interventions’ in the proper working of the economy.  That language is not impartial and cannot be called scientific.  Do orthodox economists ever tell us of the financial markets ‘intervening’ in democratic processes?  Yet they do so every day of the working week.

This failing is true of the basic theory underlying nearly every school of economics, except Marxism.  It is truest of all in the neo-classical school, which has been dominant since the 1980s.  But in 2008 the economic policies of that period, based on neo-classical ideas, brought us close to catastrophe.

And that is why I’m a centrist.  I do not believe in the market or the state.  I don’t think it is the job of a serious thinker to ‘believe’ in any such principle.  The economic analyst should appraise their advantages and disadvantages, and determine where one is fit and where another is.  We need an economics which will appraise things as they are, and not start from loaded concepts such as the ‘perfect market’, ‘perfect competition’, ‘general equilibrium’ (where is equilibrium less apparent than in financial markets?), ‘natural prices’, narrow economic ‘rationality’, economic ‘welfare’ and so on.

But to achieve that, economic theory probably has to be rebuilt from the ground up.

30/5/18

This is a revised version of an earlier piece which you can find at https://tomlines.org/wp-content/uploads/2018/04/Lines-Why-I’m-a-centrist-rev.pdf.