With John C.K. Daly, International correspondent, United Press International.

March 5, 2008
5 to 7 PM
The Rome Auditorium, Rome Building
1619 Massachusetts Avenue, N.W.
Washington, DC 20036

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Event Summary:

Dr. Daly began his remarks by listing some key attributes of the middle class. In his view, they include the possession of one’s dwelling, car ownership, access to education at prestigious universities, a certain amount of financial assets, regular vacations as well as cell phone and internet access. Based on these criteria, Dr. Daly acknowledged the existence of a middle class in Kazakhstan, which some writers put as high as 60% of the population. This is in stark contrast to Soviet policy, which for 70 years had tried to abolish all class differences.
 
According to Dr. Daly, the formation of the Kazakh middle class was made possible by the significant commodity wealth of the country. Following the initial hardships after the collapse of the Soviet Union, which had hit all newly independent states unprepared and forced them to improvise, Kazakhstan’s population has experienced substantial economic prosperity. Unlike the resource-rich countries of the Middle East, where most of the wealth is accumulated by a small elite, there has been a widespread “trickle down” of prosperity in Kazakhstan.
 
Kazakh President Nazarbayev deserves a large amount of credit for making the development of a middle class one of the key points on his agenda. Dr. Daly explained that Nazarbayev regarded a stable middle class as a guarantor of social stability, which in turn will enable the formation of a Kazakh nation.

In addition, Dr. Daly maintained that Kazakhstan’s ethnic diversity has benefited the emergence of its middle class. With only 53% of its population being ethnic Kazakhs, the country had to draw on its other ethnicities, particularly Russians, who represented some of the best and brightest individuals. While two out of six million Russians have left Kazakhstan since independence, Dr. Daly considered it a great success that so many of them have remained in the country.

Unlike Russia, where relatively few oligarchs were able to gain control over much of the economy, Kazakhstan has developed a diverse middle class. In the eyes of Dr. Daly, it consists of many new businessmen, the young and educated as well as members of the old guard. This diversity has been beneficial to the cohesion of Kazakh society.

After the emigration of two millions (well educated) Russians, Kazakhstan had to make substantial investments into its education system. Dr. Daly rated the overhaul a success. Today, one third of the country’s universities are private institutions. Also, the Kazakh government has implemented a generous scholarship program that sponsors students who intend to study abroad for up to four years.

Despite facing an uphill battle against hyperinflation in the early 1990s, Kazakhstan soon remodeled its economy in a way that attracted Western investment. Supported by rising commodity prices, the country was able to pay back its loans to the IMF seven years ahead of schedule. According to Dr. Daly, this secured Kazakhstan’s independence from that stringent taskmaster. Later, the country was the first to receive a favorable credit rating from the IMF, based on the huge oil revenues expected in the future.

Between 1998 and 2003, Kazakhstan managed to reduce its poverty rate by half, from 38% to 20% of the population. Dr. Daly estimated that the middle class now encompasses roughly 25% of the Kazakh population and consumes between 50% and 80% of all goods. Salaries have risen substantially, increasing by 21% in 2001 and growing at or above 10% ever since. The government has established a fully-funded pension plan that also covers the country’s former elites. However, most of the middle class is based in urban centers and there remains a large disparity between urban and rural incomes.

Next, Dr. Daly pointed to the privatization of housing and agriculture in the 1990s, which made a significant contribution to the development of a market economy. Today, 80% of the Kazakh economy is in private hands. Kazakh financial institutions have operated successfully for several years and are listed on international stock exchanges.

Regarding the Kazakh government, Dr. Daly stressed its supportive role for business. Initiatives from below are listened to and actively encouraged, with the government providing financial support for the development of private businesses.

The political opposition in Kazakhstan is rather weak. The White Path Party, running on a platform favoring the middle class, has been marginalized. The West has frequently criticized the country’s electoral process. In Dr. Daly’s words, however, President Nazarbayev’s Nur Otan Party is genuinely popular, even though it continues to face major challenges like the (future) growth of the middle class, corruption, the distribution of housing, education and the impact of global developments on the Kazakh economy.

Given the remarkably fast improvement of living standards, Dr. Daly called the Kazakh middle class politically passive. It will be interesting to watch its behavior in the future, as expectations are naturally going to rise. Yet, there are currently no movements that seek to overthrow the regime. Likewise, Dr. Daly stressed that there is no interest in turning back the clock towards communism.

The Central Asia-Caucasus Institute is a leading center conducting fundamental and applied research on an important world region. It has offices at SAIS (Johns Hopkins University), Washington, and in Stockholm, Sweden, through a Joint Center with the Silk Road Studies Program (Institute for Security and Development Policy). This Joint Center publishes the Central Asia-Caucasus Analyst (cacianalyst.org), the China and Eurasia Forum Quarterly, and the Silk Road Papers as well as books and monographs. Additional information about the Joint Center is available at www.silkroadstudies.org .