Whither Ukraine?

Mountain Foros Church near Yalta (Ukraine)

Whither Ukraine?

THE FOURTH REPUBLIC: Why Europe Needs Ukraine and Why Ukraine Needs Europe, Borys Lozhkin, Kyiv: Novyj Druk, 2016, reviewed by Stoddard Martin

It is a principle nearly unarguable in the capitalist West that the ‘shock therapy’ delivered by Leszek Balcerowicz to the Polish economy in the early 1990s resulted in the great success story among the transformations that followed the end of the Cold War. Mass privatisation after the fall of Marxism eradicated a command economy, Soviet style. Horrendous recession and epoch-making devaluation eventually led to the uplands of status as a ‘tiger economy’. With backsliding prevented by joining NATO in 1998 and the EU in 2004, Poland continued its new dawn of growth through the world financial crisis of 2008-9 and beyond.

In the signal instance of that country, the word ‘oligarch’ was scarcely bandied around and ‘a sunny place for shady people’ rarely cited as the ultimate destination of capital from a nation’s efforts. While Les paradis fiscaux became the playpens of plutocratic Russians, building houses and fixing toilets in the West rendered Poles fêted and hated as plucky mains d’oeuvre, and a goodly portion of what they were able to scrabble together was remitted back to the homeland. The story has been decidedly more mixed for the neighbour that Poland shares with its colossal Slavic sibling to the east and over which the two have grappled for centuries.

Ukraine is widely regarded as the basket case of Europe, second only to Moldova at the bottom of data measuring what under Western eyes is seen as progress. This remains constant by our soi-disant ‘advanced’ parameters: market economy, rule of law, freedom of expression, human rights, individual choice, tolerance, multi-culturalism. All the succeeding buzz terms have long been assumed by Balcerowicz and his kind to depend on the first. Many in the post-Soviet East have come to view them as less desirable, and the Kaczynskis and Orbáns leading nationalist surges have sought to throw out some with the bathwater. No one has quite yet ejected the baby.

Ukraine self-evidently has its own nationalist factions and a separatist war to prove it. The once Austro-Polish west centred in L’viv (Lemberg, L’wów) pulls in one direction, a Russophile east and south (Donetsk, Luhansk, Crimea) in the other. Kyiv (Kiev) in the centre remains essential Ukraine, Kharkiv (Kharkov) to the east more problematically so, likewise Odessa to the south. In a fissiparous structure of historically shifting borders and culture, it might seem that there is no final, coherent nation and never has been. However, forces within and without have been determined to see it otherwise and build a sturdy, unifying, indigenous government to prove it.

These adjectives – ‘sturdy’, ‘unifying’, ‘indigenous’ – seem but phantoms of hope to the sceptics. 80% of Ukrainians in a recent poll thought their country a ‘chaos’. The present régime of chocolate-making billionaire Petro Petroshenko was initially described by one of its chief movers – a National Security advisor and author of this book – as the Fourth Revolution. Following liberation from the Soviet Union, the country had forged forth under successive leaders – Kravchuk, Kuchma, Yushchenko, Tymoshenko and Yanukovych – who, even if coming to power under some banner such as Orange Revolution or Revolution of Dignity, all more or less perpetuated the old centralized state, privatising or half-privatising it into the hands of cronies.

What developed was a hybrid system in which monopolies living on government subsidy enriched accounts in Cyprus, Grand Cayman, Switzerland and so on while services to the general population grew more expensive and deficient. Gas prices, for example, were set much higher than costs, and shareholders pocketed the difference, paying the minimum or nothing in tax and backhanding the necessary to political factions, key cabinet members and chronically low-paid administrators and judges. The state generally retained half of what were essential monopolies but received in dividends often around one-tenth of the subsides it paid out.

Texas was looted by Texans’ is a quip describing the Kuchma era, and Kuchma was far from the worst of Yeltsin-like early leaders. Annual debt to GDP rose to 15%. A keep-foreigners-out agenda rumbled beneath a surface of smiles and hands outstretched to the West. State institutions were packed with go-slowers, this-is-the-way-it’s-always-been-ers and outright regressive obstructionists. Prosecutors were corrupted, media run by oligarch placemen, private militias used in lieu of police, which were otherwise regularly bought off. Oligarchs proved themselves predators, angling for ‘state capture’, using share structures to allow them to call the shots while apparatchiks stumped up the ante. What’s mine is mine and what’s yours is mine.

Carpetbaggers are ever obliged to move quickly. They know that they may be just a step ahead of judgement day. A rival will muscle in, a bullet find them, or a mysterious substance be put in their tea or ‘suicide’ arranged from a suspiciously strong curtain rail. Change of regime may arrive, displacing protective bureaucrats; the flow of ‘rent’ may be cut by forces internal or ex-; arrests may begin. Thus the precept: take the money and run! It’s a rare oligarch who feels safe playing for the long term; yet no successful economy can exist without at least medium term planning. Stability – that’s what markets want. Surely that is what international financial mentors like the IMF are brought in to assure.

Poroshenko owes power to the so-called Maidan Revolution of 2014. It is heir, this book argues, to a tradition of liberal revolution in the West: the Dutch against Spain in the 16th century, the French against their ancien régime, the 1848-ers, the insurgencies toppling monarchies after World War I. None of these ructions was smooth, but the fruition of them may be a liberal value system now spreading continent-wide and guaranteed by the EU. Poroshenko and his team rode to office on a surge of Euro-liberal spirit driven by ‘entrepreneurs, managers, civil activists, creatives and believers in the principle that a person comes first’. Not for nothing were they befriended and guru-ed by an heir to the 1968ers, philosophe du jour Bernard-Henri Lévy.

The author of this book became a new media mogul in the 1990s. He was hired by Poroshenko to wield a broom. What he offers in his pages is a kind of ‘unser Kampf’ on how to re-fashion a nation. Use headhunters. Bring in international experts (shades of those put into Poland’s ministries in the early ‘90s by Britain’s Know-How Fund). Reform the police, the prosecutors’ offices, the judiciary. Raise salaries so that essential civil servants earn only 50% less than ‘biznesmen’ rather than 50 times less. Cut corruption at the top, and lower echelons will follow. Remove the old conservatives, and rule of law can be brought in. Oppose racketeering. Broadcast arrests of crooked officials on TV. Champion transparency. ‘Infect the system’ with technocrats, western-educated and/or proven successful in neighbouring states like Georgia and Slovakia. Put a Horizon Capital man in charge of the Finance ministry, an East Capital veteran at Economic Development, a Dragon Capital honcho at Infrastructure. Reform the tax system: lower the rates, but enforce them. Reduce state spending: send responsibility for health and education back to the provinces; introduce means testing. Eliminate restrictions on land purchase and construction.

A cardinal principle is to act. ‘Better done than perfect.’ Once innovations are in train, you can begin to attract private investment and foreign capital. The population will inevitably want a rapid move to a western European social welfare model, but in a country where the pay rate is 1/6th of Poland’s and 1/20th of Spain’s this is unaffordable. The way forward is to become a kind of European China: a manufacturing base for the immediately accessible neighbouring market. A highly competitive, relatively well-educated labour force is key to this. In terms well-known in UK economic discussion of recent years, grow productivity, not redistribution.

Lozhkin’s book was published before much of this could be implemented. Obstruction included greed, suspicion of motives, national pride (Georgian ex-president Mikheil Saakashvili, brought in to govern the Odessa region, has recently been defenestrated) and war. There is always that huge other neighbour with skin in the game, but apparently 2/3rds of Ukrainians still favour the EU over Russia, and only some are prepared to swallow indefinite status as a borderland. The ‘terrorist operation’ in the east has encouraged the military to grow to 200,000 – shades of salvation of revolution by a Grand Armée? Volunteers, alas, include corrupt adventurers as well as patriots, as a recent Carnegie report tells us. Oversight of procurement is scant. The state military supplier has characteristics of yet one more oligarch ‘milch cow’, serving the interests of a right wing political party. Western conditionality over funds, however, is qualified by geopolitics.

Poroshenko is now as unpopular as his predecessors. New elections are coming in 2019. Reform of the judiciary has been put on hold. (The current right-wing government in Poland is a bad exemplar.) The IMF withholds major tranches of funds, and the EU is experiencing ‘Ukraine fatigue’ – how many Greek-style bailouts will the ‘basket-case’ need? Meanwhile, those Russians… can they ever truly give up desire to control a territory that in the view of one British ex-diplomat is more important to them than Wales is to the English? These are some of the questions a land of 45 million poses to the West as it tries to de-oligarchize – at the same time, ironically, that many a Trumpian dreams and/or schemes to yank the West in the opposite direction.

What finally is in ‘our’ self-interest? A democratic Ukraine probably. A rule-of-law Ukraine surely. A Ukraine that is not a satellite of Russia strategically. A Ukraine whose people are secure, providing manufactured and agricultural goods and resources (fracking?) to Europe, thus balancing or, as needed, limiting dependence on regions further flung and less reliably tied to Western values. These remain the hopes of players like Borys Lozhkin, though he is no longer in the ruling cabinet; and they seem reasonable enough. More than Turkey or Britain, Ukraine may be essential to its continent’s prosperity and peace – certainly Poles and other central Europeans think so. In the United States’ worldview, this may also be true. Meanwhile, it is argued that Russia can only benefit from a prospering neighbour with which it lives in amity and, once the neo-Soviet imperialists running that country step back, it should be possible. But… if this new order continues to be exploited by rip-off-and-run Robber Barons, all bets are off.

Stoddard Martin was visiting professor at the University of Warsaw between 1990 and 2004. His books include Cold War, Common Pursuit: Essays by British Council lecturers in Poland 1939-1999(ed. with Peter Conradi) and (as Chip Martin) Liberation in the East: a novel.

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