JOHN MARONE, KYIV
TELL 'EM SOMETHING THEY DON'T KNOW
If Ukraine wants to maintain its dynamic economic growth, it's going to have to cut red tape and bring down barriers to competition, according to a report by the Organization for Economic Co-operation & Development (OECD).
The report marks the first-ever assessment of Ukraine by the OECD, a largely Western organization dedicated to free markets and representative democracy.
However its contents are nothing new.
Ever since the euphoria of Ukrainian independence wore off in the early nineties, Western governments and organizations have been telling Ukrainians how to develop democracy and a free market.
Some saw this as natural. After all, Ukrainians seemed eager to obtain the freedoms and material wealth enjoyed by the West and, increasingly, much of Asia.
In order to get there, the former Soviet republic would need foreign aid and commercial loans.
Others, more suspicious, couldn't help but notice that grants come lined with geopolitical provisos and advisors whose salaries and benefits comprise much of the aid.
As for loans - yeah, Ukraine needed the money, but no more than international banks needed borrowers.
All this having been said, Ukraine has come a long way since independence. Its leaders are chosen in elections, and private enterprise is booming.
Along the way, there have been many bumps in the road, such as the 1998 economic crisis and the 2004 Orange Revolution, but representative democracy and free-market economics have survived.
So where does the country go from here?
Well, according to the OECD, and others of the liberal persuasion, Ukraine needs to open its market to more foreign players.
McDonald's rules Ukraine's fast food market, and the country's biggest steel mill is in the hands of the world's largest steel company, but much more could be done, we're told.
The main argument here is that foreign players introduce new technology and practices that domestic companies learn from. One of these practices is transparency, which means the foreigners will be more likely to pay taxes. Also, Ukrainians gain from cheaper and better products.
If you were a Ukrainian, however, you'd know that a) paying taxes and getting commensurate state services are two different things, and b) the price of everything is going up anyway. Moreover, why does a country have to be ashamed of wanting to keep its industry in the hands of local businessmen?
The freemarketeers would argue, among other points, that there is no danger of an international corporation pushing people around, as the company is subject to local laws.
But the world abounds in examples of multinationals destroying local eco-zones and allowing abuses of labor that would not be tolerated in their own countries. Indeed, there are reasons why companies seek new countries to set up production. The big multinationals are more powerful than many governments, which can't take all the blame for the abuse of people and the environment.
Of course, Ukraine, and the Soviet Union in general, were no strangers to human-rights abuses and environmental disasters long before international companies arrived.
And, many are quick to point out, the abuses continue.
By now, everyone has heard of the post-Soviet oligarch. He is the stuff of Hollywood films: rich, powerful and decadent.
Western governments and organizations like OECD have long associated corruption with privileges for the oligarchs.
The main remedy for corruption is creating laws that work for everyone. Clearly, workable legal systems are one thing that the West can preach about. But does the average Ukrainian really want everything spelled out in law, as it is in America? Some would surely like the courts to make a reckless driver pay up for destroying their little lada, but few would welcome the level of litigation seen in America.
Ukrainian oligarchs are no different. The only reason any of them have opened their books is because they had to in order to get Western loans.
Making oligarchs pay a fair price for the state assets that they 'acquire' would also be welcomed by the average Ukrainian. This is plain social justice. But Western governments and business have reacted in horror to proposals to review past privatization. Ironically, on this issue, they support the oligarchs.
Many foreigners got their foothold in Ukraine by courting the same corrupt officials as Ukrainian businessmen.
So, what the West really seems to want is an equal playing field to set things straight from now on.
If fighting corruption means making everyone equal before the law, this is certainly a good thing. If it means making everyone pay taxes, and prices for apartments and consumer goods so high that Ukrainian will soon be as debt ridden as North Americans, then what's the moral point here?
To put it another way, Ukrainians see corruption in a different light that many Western well-wishers.
On the other hand, the OECD mentioned in its report that Ukraine's low state debt is a good thing. I would say low public debt is also good.
The report additionally mentions tax reform. Ukrainian taxes are indeed too high, but few are paying them anyway.
Then there was a call for "self-sustaining investment and innovation-led growth."This advice could be given to any country on the globe. How does a country create the newest technology? The US drains brains from everywhere else, but it has the money to attract them. As far as investment, there is the example of Ireland, which went from a country of emigrants to an IT hub by investing in education. No Ukrainian would argue against improving education. That's why some of the poorest parents will pay their last kopeck to educate their children.
Ukrainians are as worried about the future as anyone else, maybe more, considering the country's dismal recent past.
Unlike much of the advice and exhortations that Western organizations and governments have directed at Ukraine, the OECD report points to a very real threat.
It notes that Ukraine's average annual growth to over 7 percent over the past six years since recovery from the 1998 economic collapse will not last forever.
The price of Russian gas is going up, and the current consumer boom cannot last forever, as household debts reaches its limit.
Do Ukrainians already know this? I have no doubt that the country's leaders have such information available to them. As for the average guy on the street, he's too busy trying to make enough to buy a flat and raise his kids. Tough times could be right around the corner, you say. Tell 'em something they don't know.
John Marone, Kyiv Post Staff Journalist, Ukraine
September 10, 2007
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