Over 26 years of its Independence, Ukraine failed to overcome the dramatic economic backwardness of its successful neighbors.
Why some countries are successful, and others – outsiders, which Soviet rudiments hinder Ukraine from developing and on what does oligarchy’s collapse depend, the former Minister of Economy of Ukraine, Volodymyr Lanovyi told in an interview to Politeka.
Why do Ukrainians make so little money?
Everything is very simple. People earn money when they work on successful businesses. That is, for those who have sales markets, that are competitive. Building a plant will not guarantee high profits, that’s not how economics work. Economics is a field of competition, struggle, successes, defeats, profits and losses.
Our trouble is that after the USSR we received a large number of powerful enterprises, but our “intelligentsia”, the so-called elite, did not realize that there was nothing eternal. That all these enterprises need to be urgently upgraded, otherwise they will collapse.
Did they not understand the historical circumstances or did they not want to see the obvious reality?
I did not understand. I know Kravchuk’s thinking, Kuchma’s too. They believed that the communists, together with the KGB bosses, had to agree to distribute all the wealth, to accumulate and to share profits. Such a corruption division has led to the property of people who have nothing to think about in these industries. They do not know what competition and innovation are in the markets. As a result, we have a non-modernized, morally degraded industry.
“It’s been a quarter of a century.” Has not there been a replacement of the generation? Where are those people – with another, modern, type of thinking?
Let’s not forget, property rights are inviolable. Those who have seized combines and deposits in the past will not back down now. They did everything so that legally they could not be denied rights. They are not completely stupid. They understand very well how to steal. Today it is difficult to approach them.
Structural changes in the economy, the emergence of new jobs with high wages – all this is the case of small and medium enterprises. Everyone knows that, for instance, Germany and Japan have been developing through small and medium rather than through big business. The latter, by the way, did not receive any subsidies from the Marshall Plan, or federal budgets. Only small business rose. We also have to solve this problem. Modernize small businesses where they can produce something else. Giving groundbreaking solutions in various industries. This applies, in particular, to agriculture, manufacturing.
American historian Timothy Snyder said that Europe is a prose, Ukraine is poetry. How much longer will we live in poetry, speaking in the context of political and civic maturity?
Of course, the carriers of Soviet philosophy could not understand everything. There is a set of clear rules: helping small and medium businesses, protecting where necessary, increasing opportunities. Poland did so, Germany in the 50’s as well. Let the big business turn itself out on it’s own, there should not be any expenses from the state. We have long had the enterprise market, Metal was sold even to America, Europe, Asia. But the oligarchs are not set to change anything, while closing the old enterprises, they capture the new ones. This philosophy continues. At the same time, they understand that they need to be politically entrenched. Therefore, they always supported the presidents.
As a result, not only the oligarchic system is fully grown, but also corrupted. There were people with big incomes who knew who and how to pay, how to hold their person to a high position. Plus the television was seized. The goal is to preserve the respect of their presidents and to form their own projects themselves . As in the case of Akhmetov.
The oligarchs are doing everything to destroy the middle class.
Why, are they afraid of competition?
It’s not just a competition. They are class competitors. Small and medium-sized businesses do not perceive monopolies. It wants to earn money, produce goods. During the revolutions, it showed it’s face, it’s attitude towards the authorities, and the oligarchs. Therefore, they now repel from the market, do not provide land, load businesses with licenses, taxes. Do everything to tie their hands and force them to go to another country. How to develop an economy in such conditions, when the most intelligent, most creative representatives are pushed abroad?
If the country is so monopolized, is it really possible to change it?
In certain stages of our history, the oligarchs were really rich. Bought billions of objects in London, Monte Carlo etc. But as it happens in the economy, everything ends over time. Starting from 2012-2013, all these business empires, DETEK Akhmetov and others, began to bankrupt. They could not return 100-300 million credits to foreign lenders. Their enterprises continue to decrease production volumes. But what did the government do? The authorities turned to the oligarchs and said: raise prices, tariffs, because otherwise we have a default, we will not be able to return the loans. How should the companies survice? Only by raising prices for coal, metal, electricity. That’s what the authorities did.
If the government is firm, market-oriented, democratic, free of bribe-flow, then all these oligarch holding companies are blown away. In my opinion, they have already come to their last crossroads. Of course, this will lead to social problems. But we already have a social state that is worse to imagine.
It turns out that improving the lives of Ukrainians depends on how rapidly the political class is transformed.
The political class is not independent. It always depends on the economy. In Soviet times, the party was strong, because it seized all property, all finances. However, the basis of a free and democratic system is a small, medium-sized business in all sectors. Millions of people are shareholders of various businesses. They have completely different public queries. And politicians just fulfill orders. If they are paid by the oligarchs, they, accordingly, fulfill their orders. The middle class itself understands which of the politicians to support, and which not.
Compared to Switzerland, Sweden, Germany, how far is Ukraine behind in its development?
Let’s dance from the stove. The Soviet economy could not build modern factories. The war helped: half of the German factories were taken to Russia. They have been able to compete for a while. Subsequently, there was a lag. Ukraine remained at the level of post-war Germany and the United Kingdom. That is, for 50-60 years we are lagging behind. Sweden and Switzerland – in general, are unique. They were still ahead of other countries in their development. Therefore, there is a very large gap between us.
USD 5 billion of investment in the real economy annually during the decade promise to the Cabinet within the framework of the so-called “Marshall Plan” for Ukraine (“New European Investment Plan for Ukraine and other Eastern Partnership countries”). What is the probability that we will receive these funds?
There is very little information about this. But even from what we have, we can conclude that these money are loaned. Unlike last century, there are now international banks that will carry out these projects. Money should go for specific projects. And these projects need to be protected. Bankers simply do not give money. It will not be like: here’s a billion, and you distribute it the way you want. From the Ukrainian side a toolkit for project implementation has to be created – a way for the money go to the newest productions. Putting money in a pocket will not do, although everyone is now rubbing their hands.
This is a very serious and responsible program. If we have evidence of corruption, the money flow will be stopped. Therefore, the business and the public must be prepared. Passivity is unacceptable here.
Is there a consolidated position in Europe regarding Ukraine’s economic support?
There is no such consolidation. Remember the Dutch initiative. They insisted that in the Association Agreement with the EU there was an addition that the EU would not finance Ukraine, as was the case with other candidates. Like it was for Poland, Estonia, Lithuania, the Czech Republic, and others. There, using European money, all the new infrastructure and communications were built. And we were told that there will be no funding.
There are separate initiatives by the closest partners who understand how dangerous it is to deal with Russia. These are the countries of the Baltic region, the Visegrad Group, because they are all at the border.
