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New Approach to Getting
Ukraine Out of the Pit: Ten years of experience have not provided convincing evidence of successful transformation in the post-Soviet societies. The failure of traditional approaches to transition has been fully demonstrated in Ukraine, where the economic, political, and cultural-psychological prerequisites for a democratic transformation to a market economy have been eroded as part of the process. U kraine’s policy in 1992–94 was determined by its highest priority: preserving Ukrainian statehood. The policy succeeded, but the price of success was high. In order to preserve the country’s integrity and independence, the government granted concessions and privileges to political and economic actors that had been influential under the Soviet system—the Communist Party nomenklatura, directors of the military-industrial complexes, leaders of the powerful trade unions, primarily the coal miners—who were often indifferent or even sometimes even hostile to Ukraine’s statehood building.Deepening Crisis The government, under pressure, caved in and allowed them to become the major beneficiaries of a peculiar form of "market-oriented reforms." As a result, the social structure in Ukraine radically changed. A small group gained tremendously in power and wealth—by unlawfully acquiring public property, engaging in corrupt practices, abusing their monopolistic position, and operating in the shadow and black economies. At the same time, the income and social status of the middle class—the embodiment of human and social capital as well as the driving force behind national-democratic revolution— sharply declined. The traditional radical economic reforms implemented after 1994 did not improve the situation in Ukraine. GNP declined, falling to about 25 percent of its 1990 level by 2000. The traditional reform program proposed by Western experts envisioned implementation of formal market rules and property rights. It did not take into account conditions specific to Ukraine and was difficult to adapt to local conditions. No wonder the traditional methods of privatization failed to produce the expected results. As time went by, the crisis only deepened. What emerged can be considered neither a rational, innovative, modern market economy nor a pseudosocialist or postsocialist economy. Rather Ukraine has been left with an amalgam of market institutions and informal social networks, characterized by citizens being abused by public officials, the use of connections to bend rules or the paying of bribes to break them, avoidance of taxes, widespread stealing of property and money, and fraudulent business behavior toward both partners and consumers. New World Bank Strategy The new strategy and program proposed by the World Bank and Ukrainian scholars and government officials represent a big step in the right direction. (For a description of the program, see three 1999 World Bank papers: "Ukraine: Restoring Growth with Equity: A Participatory Country Economic Memorandum," "Economic Growth with Equity: Ukrainian Perspectives," and "Economic Growth with Equity: Which Strategy for Ukraine?") The new strategy starts to integrate the concept of social capital (see box on previous page). It recognizes that sustainable economic development needs formal and informal institutions—social networks—to complement and enrich the macroeconomic and market structure. This new vision is driving development thinking beyond debates over the role of the state and the market. The new development strategy also recognizes that program implementation requires accommodation to conditions specific to Ukraine. It is clear that the government should play a vital role in development policy, but its role in the economy varies, depending on its capacity, capabilities, the country’s level of development, its degree of transformation (in the case of transition economies), external conditions, and a host of other factors. Much depends on whether the country is a newly independent or an established nation-state, and whether it is large or small. What It Takes to Succeed? If the new strategy is to succeed, several points will need to be addressed: · Government agencies, members of Parliament, the mass media, academic institutions, and the general public are not yet engaged in open discussions about the new development strategy, policies, and actions. Such discussions could contribute to a political and intellectual breakthrough, putting Ukraine on a fast track of sustained growth.· The changes under way in the economy and society are not an integral part of a broad new transition strategy, reflecting the fact that influential social and political groups seem to be ignoring the new approach to development. This indifference seems to reflect the lack of awareness of the new possibilities and challenges the new strategy opens up. At the same time, the international finance institutions seem to be reluctant to use lending and other activities in a holistic way that would establish coherence among ideas, strategies, and administrative and cultural resources.· Those investing in the Ukrainian version of social capital must realize that nation building in Ukraine is not yet complete. Successful long-run policies require national dignity, self-confidence, and self respect; the lack of integrity of the nation-state hampers the identification and realization of political will. Social capital is needed to consolidate the Ukrainian nation-state. "Ukrainization," of course, should go hand-in-hand with protection of minorities’ rights. Unless these factors are considered, the current economic reform of state administration will not succeed.· The spheres of science, politics, education, culture, and health, legal, and social services often need special protection and support from the government and at the grassroots level. In these areas, rules of professional ethics need to be established and the power of codes of behavior and peer judgment restored. Ukrainians should understand that the market is a place where the rule of law, trust, and social responsibility can lead to economic success.· Sustained development should be rooted in socially inclusive processes.The concept of social capital is an effective bridge to link mainstream economics with less traditional ideas. In such a way development economics will be better able to provide a compass to the transition economies. Veniamin Sikora is president of the Ukrainian Association of Economic and Social Research, Management, and Prognosis (ASEMP) and head of the Center for International Economy of the National Academy of Management. He is the founder of the national liberation movement Ruch and a coauthor of its program. E-mail: Sekora@ iptelecom.net.ua, t el.: 380-44-457-28-24, f ax: 380-44-457-24- 94, mailing address: Apartment 60, 139-141, Borshchahivska Street, Kyiv, Ukraine 03056. |
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