Mongolian development review

Already back in the early 1990s, Ole Odgaard and Ole Bruun (1996) concluded that the only way forward for Mongolia was by accepting and integrating market economics. Their recommended way was to combine the old ways with new techniques and thus meet the challenges of a new er in Mongolian history. The road utilizing a planned economy was terminated and closed. A painful process started as the contributions that Mongolia had been receiving from the Soviet Union dried up in 1991 as the Soviet Empire was dismantled, and transformed into the Russian Federation and the other successor states within the Commonwealth of Independent States. Of this Mongolia could have no part and all of a sudden there was the threat of an upcoming budget deficit of approximately 70 percent. The solution lay seemingly in receiving foreign aid and loans from the West and the international donor community. By 2004 70 percent of the Mongolian state budget was covered by foreign aid and loans in various forms.

Over the years textbook market economics has proven difficult to adapt into the reality of Mongolian society. The reasons for this are rather simple and straightforward. I once asked an experienced Swedish aid-worker how he saw on the future for Mongolia. He answered that he saw a future where Mongolia developed into a sort of Argentina of Asia. I was taken by surprise and responded:

-But the Mongolians have a steppe, not something remotely similar to Pampas!

Here lies the core of Mongolia’s problem, as it contains the World’s most northern desert as well as the most southern tundra. Furtermore Mongolia is a very dry country and in Ulaanbaatar there is approximately 300 sunny days a year. Every time that the Mongolian’s have tried to expand their livestock’s it has lead to erosion and loss of land where you could keep and herd animals. Thus the Mongolian society lives on the brink of what is possible. To be frank, thanks to the former Soviet aid and the contemporary Western aid it probably lives beyond its capacity.

Now it seems that the combination of the effects of the market economy and climate change has brought some further problems into the area. As the price of cashmere wool has increased, the market mechanism tells Mongolian herders that it is more profitable to herd goats instead of sheep. Traditionally around 70 percent of the herds have been sheep, while the rest has mostly consisted of goats. That has now changed, because Chinese and domestic buyers are bidding up the prices of the cashmere wool. This has an unfortunate effect on the soil, as goats eat the roots of the plants to a larger extent than sheep. Combined with the greenhouse effect this has diminished the herdable land area with around 7 percent since the downfall of communism in 1991.

The rapid disappearance of pasture land has alarmed the Mongolian Government and the Ministry of Nature and Environment has been recommending the National Security Council to step up the efforts to prevent the desertification of land. The head of the Ministry of Nature and Environment’s Sustainable Development and Strategic Planning Department, Mr. Banzragch, said that the natural balance in certain areas had collapsed as buyers from China was bidding up the prices. The livestocks of cashmere goats has increased from approximately 25 million in 1993 to more than 40 million nowadays. This increase means that the land erosion mounts up and that the useable area decreases.

This development, taken together with the mining operations around the country and global warming, is threatening to spread desertification to alarming heights. Mr. Banzragch claims that if nothing radical is done more than 96 percent of the country could be in various stages of desertification in a nearby future. This would efficiently drain the Mongolian rural areas of people and increase the population in already overcrowded cities like Ulaanbaatar, Darkhan and Erdenet. In the end it would also increase the Mongolian dependency on foreign aid.

This is not an un-common problem as people try to develop areas where the natural balance is delicate. Western economic theory tend to take water for granted and not take account for when land is close to its production and carrying capacity. The Soviet model of economic development is basically the same as the Western, as it is based on the same premises. In fact, the Western model might actually prove to worse than the Soviet model, at least in Mongolia.

We have an understanding of how to approach modernity that goes through the Neolithic revolution, towards industrialization and into a post-modern stage. However, when one is trying to develop a nomadic herder society it is not realized that the required state of stationary peasantry is not yet achieved. It neither realized that there might be good reasons for this, as the capacity of the land for instance. Instead the development efforts lead to a tragedy of the commons situation.

This means that the result of the development efforts might in the end become very negative and actually increases poverty, instead of bringing wealth to the country. Generally, it seems to be a good idea of making use of the market mechanism, but using it in the neoliberal sense in a developing country like Mongolia might prove counterproductive. Instead, it would appear a good idea to take the best parts of the model created by the Russians and combine it with some productive ideas from the West, that are proven to be sustainable in the long term. In the real world a mixed economy approach might make more sense.

Sources: Ole Odgaard & Ole Bruun (1996) Mongolia in Transition – Old Patterns, New Challenges. Taylor & Francis Ltd.; UB Post (2009) 7 July.

Photos: Anna-Karin Johansson Brikell, copyright