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An Economy Running on Money from Abroad

An Economy Running on Money from Abroad

“Goris-Stepanakert autoway, built with participation of all Armenians” reads a sign next to the very road. In other words, this road has been paid for by the Armenians living outside Armenia, the Diaspora. The money they send in is of such importance, it is one of the main reasons Armenia and its economy have not collapsed yet.

Armenia is a poor country. The transition from communist to capitalist system has resulted as elsewhere in the former Soviet Union: high (youth) unemployment, a sloppy economy ridden with corruption, roads and public services in decay and a small, very wealthy elite.  The small economy has the largest part of its labor force employed in agriculture again, in contrast to better Soviet times, when the planned economy had a large industrial sector. Whatever remained of this industrial sector after the collapse of the Soviet Union is now in the hands of the elite, consisting of more or less eleven very powerful families, who reap the profits.

In the mountainous, unfertile land, the mining sector is best suitable for exports, but as mentioned above, this is been held by the elite. Furthermore, the small landlocked country has little it can export in the first place. Turkey and Azerbaijan both have their border closed, Iran has harsh trade restrictions imposed on it, leaving Georgia as the only direct trading partner.

The small landlocked country has few goods to export.

Despite all of this, there is a large flow of foreign money going into Armenia. This due to the Armenian Diaspora, sending in money to family members still living in Armenia. This Diaspora is big: there are approximately six million Armenians living elsewhere in the world. In contrast, Armenia itself only has three million inhabitants. And because of the limited economic changes young people have in Armenia, lots of them are seeking their fortune abroad, making the Diaspora even bigger but hampering economic growth at home.

According to several people I discussed this topic with, the money from the Diaspora is basically what keeps the economy going. “Without it, the country would simply come to a halt.” tells a man working for the European Union.  Because of the money flows, there is no real incentive to change the current structure of the economy. The ones in power have an interest in keeping the status quo, those who can seek their fortune outside Armenia and those who stay manage to keep the ends together because of the money the former sends.

 Things seem to be improving though: there is a small middle class emerging and public services are becoming more reliable. But as long as the elite stays in control of the main economic drivers and the most capable working force keeps on going abroad, real economic change will not come. It remains doubtful whether the Armenian economy will ever be able to stand on its own two feet without structural changes. Ironically, the Diaspora is both the cause and the remedy for this.

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About Ruerd Haringsma

Ruerd Haringsma, 5th year Master student of International Relations at the University of Groningen, traveler, part-time adventurer and reader of books, searches the deep, dark caverns of the internet to bring you the most fresh, astounding and arcane news of international relations. He also has a beard.

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