Proposal for Economic Development of the Crimean Tatar Community in Crimea

Copyright � 2003, Terry Hallman, People-Centered Economic Development. All rights reserved.

Introduction

A significant opportunity exists for the creation of an economic development program in Crimea. This involves the Crimean Tatar community, an ethnic group which has shown a rather remarkable capacity for democratic and market development quite ahead of its time. In order to understand the significance of proposing the economic development program herein specifically for Crimean Tatars, it will first be useful to consider a brief review of history leading to the present situation.

In May, 1944, the entire Crimean Tatar community was forcibly deported from their homeland under orders of Stalin, mostly to Uzbekistan. Over the course of a few hours, they were rounded up with whatever possessions could be carried by hand, packed into cattle cars, and remained there until arrival in Uzbekistan. Roughly half of Crimean Tatars died en route and during the next few months. As was the case with many of Stalin�s methods, the experience was horrific. Half the Crimean Tatar population was wiped out in less than a year.

Following the first thaw of Stalinism in the mid-1950s after Stalin�s death in 1953, Crimean Tatars were quick to organize themselves toward the goal of returning to their homeland. This remained a formidable task during the entire Soviet era and resulted in predictable harassment from Soviet authorities all along the way. By the mid-1960s, the essential nucleus of what became the Crimean Tatar Movement had been organized.

Critical to the movement was the early adoption of, and commitment to, democratic and non-violent methods. This strategy continued largely intact throughout the movement: peaceful but determined persistence toward the ultimate goal of repatriation to Crimea. Repatriation began slowly in the early 1980s, increased in the late 1980s, and again after the ultimate collapse of the Soviet Union.

Returning to Crimea proved to be the first of numerous difficulties, rather than a satisfactory conclusion to the movement�s efforts. Upon returning, Crimean Tatars had to face entrenched Soviet bureaucrats who were generally anything but pleased to see them returning. Crimean Tatar homes and property had been fully expropriated by others whom Stalin had moved in to replace the Crimean Tatars , and the new owners were not about to give the property back. Crimean Tatars proceeded to try and construct new homes and villages on unoccupied land in Crimea. In order for the new properties to be valid and legitimate under Soviet-era practices which were still in force, registrations had to be completed and filed with such as housing and tax offices. Soviet bureaucrats simply refused to provide essential rubber stamps for registration purposes, in turn leaving Crimean Tatars in a �not legal� position. In some instances, local militsia then proceeded to destroy new houses. There was nothing in the law to force bureaucrats to do their jobs honestly, or even to recognize in any way the legitimacy of Crimean Tatars � new presence in Crimea. Without the Soviet era stamps on seemingly endless documents and papers, Crimean Tatars found themselves to essentially be persona-non-grata in their homeland.

The response was typical according to Crimean Tatar �s long-held strategy: redress of grievances through political channels, based on consensus of the reemerging Crimean Tatar community in Crimea. The Crimean Tatar community first held meetings among themselves to determine what needed to be done, then went about implementing the findings within the political status-quo of Crimea and Ukraine. Representation within government legislature was essential. Crimean Tatars proceeded to elect Crimean Tatars to the legislature of the Autonomous Republic of Crimea. At that point Crimean Tatars entered, if only slightly, the political ranks of the established status quo and thereby found legitimized voice in their own affairs.

It is easy to imagine that, under the circumstances endured by Crimean Tatars, events over time could have taken a much more violent turn. They had in the course of a few months been deprived of their homeland and property. Half had died in the course of those events. They then found themselves effectively imprisoned under Soviet rule and control. This hardly presented an opportunity for peaceful political redress of grievances, given well-known Soviet practices of intimidation and repression of political dissidents during the Soviet era. Yet despite what would seem to be a near impossible situation, Crimean Tatars developed democratic solutions in a most unlikely time and place. Where it could well be understood if the conflict had turned violent on Crimean Tatars� part, they chose democratic strategies in the Soviet Union where such were practically impossible. Upon returning to Crimea when at long last it was possible, they still had to face the full force and recalcitrance of former Soviet bureaucrats who now ruled over them and could keep their lives almost as difficult as ever. Returning to Crimea did not automatically mean escaping Soviet rule. However it happened, it seems astonishing that Crimean Tatars � frustrations did not end up in widespread violence but instead remained largely consistent with commitment to non-violence and democratic principles.

Despite impressive progress in some ways, severe hardships remain for most Crimean Tatars in Crimea. Their numbers are now around 250,000, with about the same number remaining to be repatriated. The primary barrier is lack of financial resources, resulting in half of the current Crimean Tatar population in Crimea unable to have a home. It is now widely recognized and accepted that a key financial strategy must include microfinance, or micro-credit, resources.

Currently available micro-credit sources

Micro-credit programs in Simferopol and Crimea are currently offered by European Bank on Reconstruction and Development (EBRD) and United Nations Development Program (UNDP) as a component of UNDP�s Crimea Integration and Development Program, Phase 3.

The UNDP micro-credit program was included as a key component of CIDP�s phase 3 activity. The UNDP-CIDP3 program has now become an independent credit union, Credo.

With both the EBRD and Credo programs, interest rates are high and material collateral is required for a loan. EBRD rates are 15%-30% per year; Credo rates are 20% - 35%. Both allow for a variety of collateral, including such as automobiles, televisions, and other property of similar value. With EBRD, movable property such as automobiles are held in storage until the loan is repaid. An automobile is usually the most valuable item in a household. It is unavailable for use during the loan period, which makes it impractical as collateral for the majority of people who live in rural areas. Without private transportation, getting around to take care of normal and essential business activities becomes difficult if not impossible. With Credo, collateral is available for use during the loan period. Although interest rates are higher, the deal becomes more workable. Of close to 200 loans administered by Credo, they report that only 2-3 loans have been problematic.

Though similar in function as micro-credit sources, EBRD is a bank whereas Credo is a credit union. By fact of being a bank, the EBRD program is tightly encumbered by banking laws and rules which make the program more expensive to administer and requires tighter collateral controls. By contrast, as a credit union, Credo has more flexibility in awarding and securing loans, with lower administrative costs.

Both programs are limited to those people who already have collateral sufficient to cover the loan amount. For the Crimea Tatar community, for example, most have repatriated to abject poverty conditions and therefore aren�t likely to have the material resources to secure a loan for even a few hundred dollars, much less the $4000 average amount reported by Credo. There appear to be no formal programs to help this group of people get a financial foothold. This same problem extends throughout Crimea among all ethnic groups and nationalities. Further, both programs combined have about US$ 2.5 million available for loans in a population of more than two million people.

Proposed new program

In order to remedy the situation, a new micro-credit program is urgently needed. Several models are available, compiled by International Organization for Migration (IOM.) (Source: Micro and Other Enterprise Development for Migrants, September 1997.)


* Peer Group Lending

Developed by the Grameen Bank of Bangladesh to serve rural, landless women, �the poorest of the poor�, to finance income-generating activities and alleviate poverty. Peer groups of 5 members are organized within a village and screened through attendance at weekly meetings and mandatory weekly savings contributions. Loans are made to individuals within the group by the local branch, however, only two members can receive loans at any one time. These programmes typically provide pre-credit orientation, but minimal formal technical assistance.

* Solidarity Group Lending

Refined by ACCION International in Latin America, in this form of group lending the programme makes loans directly to 6-10 members of a group. The members cross-guarantee each other�s loans to replace traditional collateral. Customers are typically informal sector microbusinesses, such as merchants or traders, who need small amounts of working capital. Payments are made weekly at the programme office. This model also incorporates minimal technical assistance to the borrowers.

* Village Banking

Pioneered by the Foundation for International Community Assistance (FINCA), village banks are community-managed credit and savings associations established to provide access to financial services in rural areas. The lending operation involves a sponsoring agency lending seed capital to newly established village banks, which then on-lend the money to their members. All members sign a collective guarantee for the loan to the village bank. The bank then makes small, short-term working capital loans to individual members.

* Direct Lending

The most common approach among North American programmes, direct lending is most similar to conventional bank lending. Programmes lend directly to a single entrepreneur or microbusiness, usually one with some operating history rather than a start-up. Loans may be small and for 12 months maturities to finance working capital, or larger and for 24 to 36 month maturities to finance fixed assets. Unlike most group lending programmes, loan underwriting is usually based upon the potential of the business and the character and skills of the entrepreneurs.

* Transformational Lending

These programmes are distinct because they combine access to credit with more comprehensive business assistance services to help microentrepreneurs address the challenges of operating a larger enterprise. The technical assistance may focus on general topics, such as cash flow management, personnel, market development, and production technology. Alternatively, it may focus on the market information and technology needed to develop particular business sectors.

The program will be based on two models, Grameen Bank and Good Work. Grameen Bank, also known as the peer group model, was created in Bangladesh in the early 1970s. The Good Work model was founded around 1991 and is based in Durham and Chapel Hill, North Carolina. Good Work reports a 95% business survival rate along with more than 98% loan repayment rate over the past decade. Good Work is a combination of solidarity group and transformational lending models.

A key critical characteristic of Grameen and Good Work is no requirement for material collateral.

The Grameen model typically works as follows. One person seeks a loan and her business idea is accepted. She is then required to find four other people to form a group. The first two people are given a loan after both business ideas are approved, and the remaining three people are encouraged to make the first two businesses successful. After a few weeks, if the first two loans are being repaid on time, two more people in the group get loans. After a few more weeks, the last person in the group gets a loan on condition that all of the prior four loans are being repaid on time. First loans are relatively small, but large enough to get a business started. After all first loans have been repaid, each person in the group is eligible for a second, larger loan if needed. The same rules apply to the second round of loans. With a successful round two, each is then eligible for a third and larger loan. People are free to pool their loans in any round, restricted only by repayment rules and time frames.

With the Good Work model, a �loan circle� of 7-9 people is established. Each person in the circle must complete a training program for business planning and market research. After this is completed, business plans and accompanying market research are submitted by each person in the group and loans are awarded. First round loans are small, and pooling of loans is allowed. After each person in the group has repaid the first loan, second larger loans are available to all for round two, and the procedure continues with round three.

The primary distinction between Grameen and Good Work is the requirement by Good Work that participants first complete training for business planning and market research. Grameen-type loans are for people in developing countries, whereas Good Work-type loans are for people in more developed countries. The training required by Good Work is preparation for further participation in traditional bank lending programs which commonly exist in developed countries, but less so or not at all in developing countries. Whereas formal business plans and market research are useful in order to function effectively in developed countries, they are less so in developing countries where business is not widespread and markets are not developed.

Collateral with both of these models is in the form of moral collateral. Knowing that each person in his or her loan group must repay their money is a key incentive for people to screen each other from the group at the start if any doubts exist about honesty. Whereas external lenders � lenders not living everyday in a local community � probably cannot easily know who is trustworthy and reliable, it is expected that local villagers know this information intimately. One might fool his bankers, but it�s much tougher to fool everyday neighbors, friends, and associates. Thus, risk is automatically assessed and assigned by borrowers who have the incentive to make hard and stringent judgments. Such assessment among peers would seem highly likely to produce favorable loan outcomes, particularly because the same dire need for financial resources also motivates no-nonsense assessments among peers as to who gets loans. Indeed, the reported outcomes of nearly 100% loan repayment rates with both the Grameen and Good Works models bear out the validity of moral collateral as a financial strategy.

UNDP Crimea Integration and Development Program � A Closer Inspection

Unquestionably, the United Nations has taken a bold lead in addressing the issue of global poverty and poverty alleviation. Obviously this is and should be a primary organization in doing so. Admirable efforts of the UN and its UN Development Program notwithstanding, the CIDP-3 program is inevitably delimited by the very fact that the UN is an enormous organization, and therefore subject to the frailties of any large and expensive bureaucracy. It is useful to review at some length the CIDP-3 program here, in order to compare them with the reality at hand.
 

�Programme support objective 4. Reduce marked economic disparities between underprivileged groups and the rest of Crimean population through income generation and employment creation with special emphasis on SME and credit facilities.

�Increasing socioeconomic disparities between various social or ethnic groups in a given society have been known to contribute significantly to growing internal tensions and even open conflicts in some countries. The complex reality of the Crimean situation shows how economically disadvantaged FDPs (formerly displace persons) are compared to the rest of the Crimean population (mostly people of Russian and Ukrainian origin). Also, sustainable human development is hampered in such settings. Therefore, the development dimensions to conflict prevention must be considered and responded accordingly.

�Access to micro and small credits is the most urgent need of these enterprises and self-employed persons. The Programme will address this need by the provision of financial services on a sustainable basis, in order to alleviate poverty through income and employment generation. The Programme will follow the strategy to reach this objective through accelerating the process of downscaling of the formal banking sector in Crimea through incorporating the microfinance component of the programme as a microfinance unit in a commercial bank. For this purpose the Programme will work with commercial banks in the project area that operate according to sound banking principles and that have the corporate strategy to downscale their operations. It is expected that, through the demonstration effect of the Programme�s microfinance component, commercial banks perceive that microfinance can be profitable while maintaining a high quality portfolio. It is expected that this will accelerate banks to downscale, which will gradually lead to competition, an increase in the quality and competitive pricing of loan products.

�It is expected that downscaling and increased penetration will stimulate micro and small business entrepreneurs to contact banks for microfinance. Both the downscaling of banks and increased familiarity of the target groups in dealing with commercial banks will lead to increased access to financial services by micro and small entrepreneurs.

�The Programme will adopt and advocate internationally accepted sound microfinance practices in the implementation of the credit delivery for micro and small entrepreneurs.

�In addition, the Programme will conduct an in-depth market research on the nature, volume and expected growth of the potential demand for microfinance in the programme area. The study will investigate all relevant aspects required for banks that consider downscaling and will also include the reasons for micro and small-scale entrepreneurs not to approach banks. The study will include recommendations on best ways how to target this market. The results of this study will be communicated with the commercial banks that have branches in the project area. It is recommended to include the informal sector in this research study. It is expected that the results from this study will demonstrate the nature and volume of the demand for microfinance, which could stimulate banks to further downscale their lending practices, improve their knowledge and understanding of the client base, refine their product methodologies and improve their marketing strategies.

�In parallel, the Programme will strive to improve the enabling environment for micro and small business entrepreneurs (SME), as a complementary solution for job creation and therefore poverty alleviation. The rather hostile environment for businesses in terms of legislation, high taxes, extensive business oversight procedures and so forth obstructs entrepreneurial people to start or expand a business. The present environment drives businesses in the shadow economy, which makes it more difficult for this business to use business support services to optimize and expand their activities. The present environment severely reduces the potential of the SME-sector to create jobs and wealth for the communities.

�To support the development of the SME sector the Programme will focus on policy reform at grass root level with the objective to create a more conducive environment for the development of the SME-sector in order to alleviate poverty through income and employment generation.

�The Programme will conduct an in-depth research study on the opportunities and constraints of the SME sector with the objective that policy measures are taken to improve the enabling environment for the SME sector. Such research will include the informal sector on which, at present, no in-depth studies have been conducted.

�The research will take place through establishing task forces on a series of relevant topics. These task forces should be comprised of key players related to the selected topics. After in-depth research, community based seminars will be organized to deliberate the topic and to come to ways to improve the enabling environment related to that topic. It is the objective to structure the research to bring about and reinforce a process of deliberation through seminars at the local level, in order to facilitate policy reform measures. It is envisaged that this research will from a basis for an active and continuing private/public sector dialogue on the SME sector.

�The Programme will sub-contract the BDC's to provide support in this research study. The BDC's have established a client-base and have developed a network of relevant contacts in their region. An active role of the BDC's in the surveys, seminars and private/sector dialogue, from the very start, will further enhance their capacity as advocates and service providers for the SME-sector. The sub-contracts with the BDC's will be made on basis of their performance and not on an expense basis. This would encourage BDC's to become more cost effective in their operations and to place a higher emphasis on the quality of their services.� 1

Two problems emerge from this reading. First, the microfinance (micro-credit) component, though highly touted and seen by UNDP as a critical factor, is no longer operational. Credo credit union represents the surviving remnants, now working independently and able to service around 200 clients at a time. The Crimean Tatar population alone is more than 250,000, with another 250,000 waiting for repatriation. Not mentioned is the amount of money for the program, which according to Credo is less than half a million dollars. UNDP-CIDP3 is considering using Ukraine Microfinance Bank as its microfinance component. This is very similar to the existing EBRD program (and is funded in part by EBRD.) UMB, while surely well-intended as well as useful for many people, is sure to exclude the poorest and most needy due to stiff material collateral requirements.

This represents a disproportionately large percentage of the Crimean Tatar community, who for the most part have absolutely no access to finance and credit markets. Half are without their own homes, usually a family�s largest asset and strongest asset for loan collateral. Crimean Tatars� properties were stolen, then given away to others during privatization. Where the state gave homes to most citizens, many of those homes in Crimea were the rightful property of Crimean Tatars but now are firmly, and probably irrevocably, in the hands of someone else. Crimean Tatars were in essence robbed and left with nothing. Without property, they are excluded from microcredit funding, which has been identified by CIDP3 as a critical component of the Crimea development program.

Second, the program �will conduct an in-depth market research on the nature, volume and expected growth of the potential demand for microfinance in the programme area.� With due respect, this seems akin to researching night time to determine potential demand for daylight. To go to the time and expense to conduct a research project to see if there is possibly a greater demand for more loans is inconceivable at best, and a waste of money and time at worst.

The UNDP program looks good on paper, but, a thorough reading of the entire proposal, including very detailed graphs, charts, projected outcomes, and so on, seems to be more academic than a workable real-world solution. The worst outcome is that people�s hopes for relief and a better life are raised, only to be let down by program under-funding or failure. The UNDP program is overly complex, and is clearly unable to address what are extremely obvious needs from one end of Crimea to the other. The fundamental challenge of this or any development program in Crimea absolutely involves the question of how to achieve economic development in a sphere where hundreds of thousands of people have nothing. Without economic development, the rest of it becomes an exercise in futility. Overall, the UNDP-CIDP3 program is far too complex and cumbersome to address the needs of such as the Crimea Tatar community immediately or even in the foreseeable future.

Other sources of funding

The only other sources of funding for the Crimean Tatar community are the government of Ukraine and the government of the Autonomous Republic of Crimea (similar to federal and state governments in the US.) Ukraine has made available a total of US$8,000,000 for 2003, or about $32 for each of 250,000 Crimean Tatars currently repatriated to Crimea. Quoting from a September, 2002 press conference:

�First Deputy Chairman of the Republican Committee on nationalities and deported peoples Vladimir Renpening told the press-conference in the Council of Ministers of Crimea that the Committee's goal for the nearest future will be defending in the Crimean Parliament of the budget funding for Resettlement and Cultural Development of Deportees Program for 2003. It is planned to allocate UAH 43M from the State budget for the next year, and the Committee will request UAH 18.3M from the Republican budget. Most of the funds will be directed to resolve housing problems and construction of communal systems in compact settlements of the deportees. Presently about 120 thousand deportees who have no houses, are standing in line. In addition, the Committee has high expectations from the visit of representatives of 18 embassies to Ukraine of countries which take part in the UN Crimea Integration and Development Program.� 2

This translates to another possible US$ 3.5 million from the local Crimean Republican budget. Given a possible total of US$ 11.5 million dollars and 120,000 Crimean Tatars without homes, consider some numbers. Homes in Crimea can be built for about US$ 10 per square foot or US$ 100 per square meter. A home for adequate space for four people comes to around 1000 square feet or 100 square meters. If 100% of government funds are used for housing, allowing four people per home at a cost of US$10,000 per home, the result for 120,000 people without homes comes to 30,000 homes at a total cost of US$ 300,000,000 dollars. At this rate, assuming no population increase nor inflation, it will take about 26 years to build the necessary number of homes. This ignores the need for such things as food, clothing, medical care, educational facilities, and transportation. Adding in another estimated 250,000 Crimean Tatars wishing to be repatriated to Crimea, and assuming none of them will come to homes built and waiting for them, another 62, 500 homes will be needed at a total cost of US$625 million dollars. These will require another 54 years to build, for a total of 80 years to meet only housing needs. It is extremely unlikely that the Ukraine government, UN, or any other organization or group of organizations, will come up with nearly one billion dollars it will take to build these homes quickly.

Furthermore, most Crimean Tatars live in rural areas where infrastructure is partially or entirely unavailable. Most have no gas, many have neither a water system nor electricity. The above numbers don�t even begin to account for the physical infrastructure deficiencies, nor do they account for personal needs (food, clothing, etc.)

The president of a consortium of some 200 Crimean Tatar businesses estimates 10,000 potential entrepreneurs. Given the desperate conditions of most Crimean Tatars, this number would seem to be a low estimate. Most would have a strong motivation to do business and generate income given an opportunity to do so. Nevertheless, this estimation of 10,000 will be used herein for the purpose of discussion.

The EBRD/MFB program has about US$27,000,000 available for both small and medium enterprises according to its 2001 summary for Ukraine.3 This comes to roughly US$ 1 million for each of Ukraine�s 25 oblasts, including Crimea. No average loan amount figure is available. This amount funds microcredit loans up to US$30,000, in addition to small business loans up to $125, 000.

Credo has less than half a million dollars to work with average loan amounts of $4,000 each.

Allowing a combined total of US$ 1.5 million between both programs, and using a conservative estimate of $4000 average loan amount, a total of 375 loans can be made throughout Crimea. (This number is probably lower because the bulk of funds are available with EBRD/MFB, which services loans up to $125,000 from its total funds.) With an estimated 10,000 potential entrepreneurs in the Crimean Tatar community alone, it is obvious that only a very small fraction of overall need for these loans is being met.

The cost of funding 10,000 projects at an average of $4,000 each comes to a relatively modest total of $40,000,000. Even if all available microcredit funds now available were for the Crimean Tatar community, there would still be a shortage of more than US$ 38 million. Since those funds are available for all Crimean citizens, the shortage is even higher. And, since the Crimean Tatar community has comparatively less property for collateral, they also have comparatively less access to those funds � which in turn makes the shortage even higher. Crimean Tatars comprise about 13% of the Crimean population. As an alternate method of calculation: considering a total of 375 maximum loans concurrently, available to everyone, this allows a total of 48 loans for the Crimean Tatar community, for a total of US$ 192,000. This yields a shortage of $39.8 million of the estimated $40 million total needed to service the Crimean Tatar community.

Discussion

In 1996, I wrote a position paper for the Committee to Re-elect the President (US.) The paper broke new ground in matters worth mentioning here.

Overall was a warning about leaving more than a billion people in the world to live in poverty. Poverty is a dangerous human condition, and will rarely endure long before explosive consequences result.

One key point of the paper was that we are now entering only the third age of human civilization in recorded history. The first age was agrarian, where agriculture was the primary method of economic sustenance. This phase of human development allowed people to end nomadic lives of hunting, gathering, and always on the move from one place to another for the purpose of survival. We learned to plant crops, cultivate fields, domesticate animals, and settle in one location to grow food and take care of basic physical survival needs. Once past the need to constantly move around to seek food, we were able to settle down and create more permanent living situations. This in turn allowed the first villages, the first permanent fixtures that gave rise to all of human civilization. This phase continued through most of our history, gradually being refined and improved such that we developed towns, small cities, larger cities, and ultimately, empires. Larger cities and empires were relatively recent developments, within the past five thousand years.

Then, about three hundred years ago, a revolution took place which ultimately transformed human civilization around the world. This was second phase of civilization, the Industrial Revolution born from Western culture. Machines were invented and developed to do much of the production work required of men or animals for thousands and thousands of years. New machines were created to make clothes, plow fields, reap crops, process food � and of course make war. The Industrial Revolution created the Industrial Age, in which many of us and our ancestors have lived for at least three centuries. It allowed the development of larger cities, new nations, the disappearance of old empires and creation of new ones. It also created considerable culture shock regarding news ways of life as contrasted with how we lived for thousands of years prior.

During only the past thirty years, another revolution has begun. This is the Information Revolution, the third phase of civilization, now giving rise to the Information Age. This age is characterized by rapid, efficient exchange of information as being the basic economic factor for human survival, whether individuals or nations. Any person or group of people excluded from access to common information will be at a disadvantage serious enough to be a risk to survival. Further, the Information Age is, by its very nature, highly technical. The education and training required to participate may be beyond the grasp of billions of people in the early phase, leaving them at serious economic disadvantage. Thus some people can be excluded from the emerging Information Age, and we come to the problem of the digital haves and have-nots. Those who have access and opportunity to participate in the Information Age can expect a much higher chance of survival than those who do not have such opportunity. Following my 1996 paper, this concept became known as the �digital divide�, a problem to which the US has now addressed tens of billions of dollars.

A second key point was the consideration of what will happen with those people who are excluded from economic development, doomed to live in poverty with little hope of escape. In the Industrial Age, the agrarian economy did not simply disappear. In the Information Age, the agrarian and industrial economies will not simply disappear. Agrarian, industrial, and information economies will co-exist because all are integral to our collective survival. Still, agrarian and industrial economies will recede to secondary importance as measured by level of income, and those who must rely on the older economies for income will be comparatively worse off than those in the leading economic system, information.

In order for economic development to take place in any given location, the very first thing required, before anything else can possibly happen, is information. This information includes first and foremost where to look for the necessary resources to do anything. If new businesses are needed, knowing they are needed and finding funding for them are two very different things. The first step is to locate possible capital resources in order to move forward, and this step is no more and no less than information. Once resources are located, the next step is what terms and conditions are involved in obtaining those resources -- more information. Once this is known, paperwork must be completed, business plans made, market research and due diligence conducted, and all of this compiled and forwarded to the appropriate parties. Again, nothing more than information. In fact, most of the work involved between identifying a need and solving the problem is information acquisition and management: getting and developing information. Neither agrarian nor industrial economies are possible otherwise. Fast, reliable and efficient exchange of information is essential. Information has now become a critical factor in determining whether any business or economic activity succeeds, or fails. Information and technology specialists are essential to keeping information flowing, and their value is such that they are generally paid more money for work than agriculture or industrial workers. Information workers manage symbols: writing computer programs, compiling and analyzing numbers, and so on. This is the life blood of national economies and the global economy. Nations with inferior information and communication systems suffer more economic difficulties than those with superior systems.

So the question arises: what happens to those people left out of the information world? Even agrarian and industrial economies are becoming more and more dependent on efficient communication and information. Technology has improved the efficiency of both those economies by replacing human workers with machines. Possibly these displaced workers simply are not needed, nor those people who are already excluded from the information world. Possibly the world can get along just fine with a billion less people. All of us are not needed for a sustainable global economy. In fact, a sustainable global economy can probably be achieved more easily with a smaller human population. In which case, the question arises: who will be disposed of? Are human beings disposable?

This is a tricky question. Except in the case of self-defense, if for any reason we answer "Yes", regardless of what that reason is, we are in effect agreeing with the proposition of disposing of human beings. Whether disposal be from deprivation or execution, the result is the same for the victim. If we agree that sometimes, for some reasons, it is acceptable and permissible to dispose of human beings, actively or passively, the next question is "Which people?" Of course I will never argue that one of them should be me, though perhaps it should be you. You respond in kind, it cannot be you, but maybe it should be me. Not only can it not be you, it also cannot be your spouse, your children, your mother or father, your friends, your neighbors, but, maybe someone else. Naturally I feel the same way. Maybe we come to an agreement that it shouldn't be either you or me, or our families and friends, that can be disposed of, but perhaps someone else. While we are debating this -- passionately and sincerely, no doubt -- a third party comes along and without warning disposes of the both of us, or our families, or our friends. And there is the trap we have fallen into, because whether or not we approve of our or our families' and friends' demise is irrelevant. It is fair because we accepted the principle of human disposability. We just didn't intend that it be us who are tossed, but if we or our families and friends die, it is in accordance with principles that we ourselves have accepted and so must live and die by.

Once a nation or government puts people in the position of defending their own lives, or that of family and friends, and they all will die if they do nothing about it, at that point all laws, social contracts and covenants end. Laws, social contracts and covenants define civilization. Without them, there is no civilization at all, there is only the law of the jungle: kill, or be killed. This is where we started, tens of thousands of years ago.

By leaving people in poverty, at risk of their lives due to lack of basic living essentials, we have stepped across the boundary of civilization. We have conceded that these people do not matter, are not important. Allowing them to starve to death, freeze to death, die from deprivation, or simply shooting them, is in the end exactly the same thing. Inflicting or allowing poverty on a group of people or an entire country is a formula for disaster.

These points were made to the President of the United States near the end of 1996. They were heard, appreciated and acted upon, but unfortunately, were not able to be addressed fully and quickly due primarily to political inertia. By way of September 11, 2001 attacks on the US out of Afghanistan � on which the US and the former Soviet Union both inflicted havoc, destruction, and certainly poverty � I rest my case. The tragedy was proof of all I warned about, but, was no more tragedy than that left behind to a people in an far corner of the world whom we thought did not matter and whom we thought were less important than ourselves.

We were wrong.

* * *

In the 1996 paper, a solution was proposed which will work for the benefit of most under-served communities: develop a market economy in local areas where poverty exists, along with community-funding enterprises which will provide financial resources to those areas over time. The latter involves nothing more than a re-direction of profits in the traditional capitalist scheme: make profits from a lucrative enterprise available to those in the community who need the money, rather than to the pockets of a few who do not need the money but seek only greater accumulation of finite wealth.

It is not enough to merely give people the things they need to survive. This will work for a short time, but is not a long-term solution. There is an old saying: give a man a fish and he can eat for one day. Teach him to fish and he can eat for a lifetime. Giving people enough to live today may be enough for today, but it is not enough for tomorrow. Helping and teaching people to make a living, sustain themselves and their families, is in fact the only long-term solution to the problem of poverty. Further, for the first phase of economic development or economic recovery of any location, it is also possible to create an ongoing source of the critical funding needed to get the job done. Capitalism and market economy comprise the best economic engine ever invented. Assisting poor communities in developing their own markets is now meeting growing acceptance as the best way to go to alleviate poverty. The profit motive, integral to capitalism and market economics, is the driving force for successful economies around the world.

In all cases, a certain amount of outside funding is needed to get things started. I proposed a strategy for this starting phase: at least one enterprise in a community, the function of which is to provide profit to be used in the community to grow more businesses. Most of the net profit from this community-funding enterprise would be placed into a community development fund such as a credit union. The balance of profit is invested into the business for growth. The community fund is then used by people who have most need, rather than the conventional practice of returning the money to the pockets of only a few people. Those few people tend to become wealthy to the point that they do not actually need more money, while many people in any given community probably do need the money. In this regard, this strategy of directing profits for use by people who have the greatest need might be called �social capitalism.�

Traditional capitalism results in profits for the few people who own an enterprise. Over time, this often results in enormous amounts of money for a few people. This is the appeal of capitalism: the possibility of gaining great personal wealth, becoming rich. The problem is that money is not an unlimited resource. If money piles up in the hands of a few people, this must come at the expense of others who will then have less, or nothing at all. There is no other possibility. This is the basic flaw and weakness of capitalism, and was the central point of the 1996 paper. The end result is uneven distribution of resources.

This same result will be the outcome in any community, village, city, or state: a few people will become very wealthy and have far more money than they need, while many people will be left with little or nothing. Thus, merely introducing capitalism and market economy into a community will bring limited benefit, mostly to a few people while many others are left in need of basic living requirements. This is an especially tough problem in Ukraine and Russia, where so-called mafia capitalism is not uncommon, and bloodshed is not unusual in the race to accumulate as many personal assets and as much money as possible. It is safe to say that most of the players in the mafia capitalism game are not working for the benefit of the community, but only for themselves and the smallest number of people possible with whom their winnings must be shared. This is the exact opposite of what is needed, and the results are very obvious throughout both countries in the form of widespread poverty and all that comes with poverty.

There is no requirement in capitalism for the direction in which profits will go. They can accumulate in the hands of a few people, and they can be made available to meet social needs. Using profit to meet social needs does not necessarily remove the profit motive because everyone involved in such an enterprise is likely to want it to be profitable so that they will continue to have a job and income. This has been the case many times in US companies, for example. A company may have an economic downturn and lose money instead of making profit. Employees often accept lower pay to keep their jobs and to keep the company going. Employees know very well that the company must once again make a profit � end up with more money than it requires to operate it each year � if they are to keep their jobs. Otherwise, it will consume more money than is needed to operate and finally cease to exist when all of its money is gone. Employees accepting lower pay is a way to help return the company to profitability. The employees all share the profit motive. The profit motive is not the exclusive domain of the few people who start a company. It is shared by everyone involved because each has his or her own self-interest in keeping the company going.

Creating an enterprise for community funding will work for enriching a community just as well as it will work for enriching a few people. The profit motive remains intact. The enterprise is sustainable as long as it makes a profit, just as with any other business. The main limitation is the time it will take to grow enough to provide the money needed by the community. A credit union or bank, by comparison, can make sufficient money for a community available more quickly. These can be funded immediately with sufficient money to service entrepreneurs in a community. In turn, businesses and jobs are created quickly, reducing the overall financial needs of the community. The limitation of a bank or credit union is making enough money in the process of lending money to sustain itself. This money is made by charging interest rates, which must be high for micro loans. It requires much more time, work and therefore cost to lend one million dollars among a thousand different people than lending the same amount to one person, for example. As a result, the interest rates for micro loans need to be high in order to cover the operating costs of making these loans. Even with high interest rates � up to 35% in the present case � it remains difficult to earn sufficient profits to be able to make loans across a wide region such as Crimea where potential borrowers are spread out in remote areas across the region. The cost of outreach, training and multiple visits in that process can exceed 35% interest ultimately earned on micro-loans to remote areas.

By combining a community-funding enterprise (CFE) with a micro-credit union, the limitations inherent in each one is greatly diminished. The CFE provides sufficient funding to ensure the operating costs of the credit union, reducing the risk that the credit union will have any need to use its capital to sustain itself. The credit union immediately makes available sufficient loan money to match the needs of the community, thereby eliminating the time needed for the CFE to generate the same amounts of money. Additionally, CFE profits over and above what is needed to help with the operating costs of the credit union can be put directly into the credit union. Over time, the amount of money used to originally fund the creation of the CFE is offset by CFE contributions to the credit union. The credit union is increased so that larger amounts of money become available either to make larger loans or to service more borrowers. Together, the CFE and credit union create an enterprise where the original funding not only remains but also increases with time. They complement and balance each other by addressing the economic goals both have in common and offsetting each other�s limitations.

The proposals made herein will not solve the economic problems throughout Ukraine nor Crimea. However, they can begin to solve the economic problems of people who live in or near poverty. Waiting for problems of poverty to be solved as a result of improved government, structural reform, and so on will take decades at a minimum. It is brutally unfair and unreasonable to simply sit back and wait for the plight of poor communities to improve in such a manner if there are any other possibilities. In doing so, we are very clearly letting poor people know that they are not important, they do not matter very much, and, after all is said and done, each of them is disposable. We also assume poor people will not object to this, nor will they decide or be able to resist it. In the meantime, they will be expected to obey the law, be decent citizens, and behave themselves until death takes them. Such expectations are illusions.

The mere fact that the Crimean Tatar community has been through so much abuse and tragedy and still manages to maintain a focused, democratic, respectful and civilized demeanor speaks volumes. They were stripped of their homes and property, deported, lost half their population in less than a year, were harassed, tortured, and finally were grudgingly allowed to return to Crimea, and to nothing for most of them. They are now stuck in a governmental system which they did not create, over which they have very little influence. They receive, and will likely continue to receive, small token payments and gestures from the government in the hope of continuing to pacify them. The UNDP program appears to fulfill the same function: to pacify the Crimean community, keep them in check, without any clear game plan as to how, exactly, the program will actually improve the lives of most Crimeans. No doubt that any and all assistance, regardless of its real purpose and even in pitifully small amounts, is somewhat encouraging. Very little is better than nothing at all, though not by much. Such encouragement is essential, but it should and must also be honest: no programs currently underway have any possibility of making a significant difference in the lives of most Crimean Tatars, nor for most of the population of Crimea. The resources in these programs do not come close to matching the needs of half a million people of the Crimean Tatar community � much less the entire population of Crimea -- and I have no doubt that most of Crimean Tatar community does not understand this. On the other hand, those who are homeless, 120,000 or more, understand their reality very well. Again, it is unrealistic to think or hope that the community can and will remain patient forever. Cold, hunger, and disease are powerful internal motivations for change, regardless of what must be done for change. Seeds of unrest are planted and real. And, as we have seen again and again, such unrest can and does breed greater catastrophes, up to and including war and terrorism.


 * * *


In the emerging global war against terrorism, first response has necessarily been to target and destroy existing terrorist organizations. This is a case of global self-defense. Preventing terrorism is at least equally important. There is an emerging consensus that poverty provides the essential breeding ground for terrorism to emerge. People with nothing have nothing to lose and much to gain.

In efforts to deal with communities in or near poverty, it will be useful to target progressive, peace-oriented communities just as aggressively as has been done in targeting terrorist cells. Both types of communities are quite similar, but, one has attempted a peaceful path whereas the other has not. Toward this end, the most promising and deserving communities must be �hit� with equal force as is brought to terrorist cells � the difference being delivery of resources rather than ordinance. The point is to grow the best, most promising communities with the same focus and passion brought to destroying terrorists.

Rewards must come for being decent, peaceful people to the same extent that punishment is brought for those who are not. There is no more obvious a case to be made for such reward than that of Crimean Tatars. This is a community which deserves to be rewarded first, quickly, and strongly as the opposite example of terrorist threat. Attending to those communities which represent the strongest threat very simply invites others to follow suit and become threatening. Rewarding those who represent strong and clear commitment to democratic principles and peaceful resolution of conflict will have the same effect: inviting others to follow suit and become peaceful and democratic. This is the best possible outcome, and an excellent start toward building a better world based on democracy, peace, broad prosperity, and the fulfillment of basic human rights.

Conclusion

Just as the US now heavily uses smart bombs in warfare, it is becoming increasingly apparent that the equivalent is needed in aid efforts. It is not enough to spend, say, US$ 7 million dollars for five Tomahawk cruise missiles and then spend a fraction of that amount in building a peaceful community which does not merit targeting by missiles. Yet, that is what we have in this case.

It might be argued that the US and other wealthy nations have spent billions of dollars in aid to foreign countries just in the past decade. This is true, but hardly a good point. We need look no further than the example of Russia to understand how billions can be spent and almost completely wasted, for nothing. In fact, nearly US$ 20 billion in aid from the US to Russia disappeared in the mid-1990s and has yet to be accounted for. The only thing that is clear is most of the money vanished in Moscow, despite the fact that the money was intended for use by regions in all of Russia. Consequently, in 1998, Washington abandoned this big-money, top-down approach and began to focus on much smaller amounts to specific regions which demonstrated commitment to democratic principles and market reforms. This is what is needed now for the Crimean Tatar community.

To service the estimated 10,000 available entrepreneurs of the community, an approximate total of US$ 40 million dollars is required. If the community were misbehaving and conducting, say, genocide or terrorism, the West would surely spend much more than that amount to bring them under control such as in the Yugoslav conflict of the late 1990s and the present Afghanistan problem. As a point of comparison, more than 160 cruise missiles, for example, were used in Kosovo by April, 1999, at a cost of about US$ 250 million.

It is not safe to say that the Crimea situation will not also get out of hand. There is, in fact, no reason to think such a thing, except that we might prefer to. It is much wiser to invest money now and prevent conflicts from escalating, as well as encourage and embrace peaceful and democratic efforts which, so far, hold sway.

Broad economic development among all of the Crimean Tatar community is essential, and is imperative toward creating and sustaining models of peace and security. Despite currently having extremely limited annual budget resources to work with, leaders of the community have pledged to commit US$ 2 million dollars to the creation of a micro-credit union � if matching funds can be supplied by a foreign sponsor, for a total of US$ 4 million total to start. The balance of US$ 36 million will be sought as quickly as possible while the first tranche is administered.

An idea for a community-funding enterprise which will supply ongoing funds over time has been developed, market research completed, but will not be presented herein in order to keep the idea out of public domain. As is normal with any promising business prospectus, the enterprise is available for confidential discussion with appropriate parties.

In keeping with the US� avowed war on terrorism, start-up funding and the balance of funding should most appropriately come from the US and the West, from public or private funding sources. Targeting good communities is just as critical, if not more so, than targeting problematic communities. Such is the opportunity before us.

Finally, this proposal should not be construed to detract in any way from the necessity of economic development for all of Crimea regardless of national or ethnic origins. This proposal is an attempt to address the most critical needs first, which in this case is the Crimean Tatar community. After these needs are adequately addressed, strategies and methods which arise from this effort can and should be adopted for the Crimean population as a whole as has been initiated by the UNDP-CIDP3 program. Funding to such programs needs to be increased considerably to the ultimate benefit of the overall Crimean and Ukrainian population. This proposal represents a matter of �first things first�; the Crimean Tatar community represents the most urgent and deserving issue. As such, the Crimean Tatar community needs to be made whole in order to meet honest, implicit moral requirements necessary to move forward toward a sane world and broader peace. The opportunity exists to set clear, positive moral precepts and precedents. Such an opportunity must not be ignored or allowed to fall by the wayside in the lust for revenge. An equivalent lust for peace is called for, and such is the opportunity before us now.

Terry Hallman
Simferopol, Crimea

December, 2002 - January, 2003

 

 

 1 UNDP Crimean Integration and Development Programme [PDF]

 2 http://aspects.crimeastar.net/english/press/news/september2002.htm

 3 EBRD, Ukraine - signed projects �  Net cumulative business volume in Ukraine as of 31 December 2001


 Further reading: Institutional Development of the Crimean Tatar National Movement

 

Copyright � 2003, Terry E. Hallman, People-Centered Economic Development.  All rights reserved.

 

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