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Ukraine: Economic Analysis of a Political Situation

Nikolas K. Gvosdev has written a piece about Ukrainian economy and politics:

Economist Anders Aslund, writing in the fall 2003 issue of The National Interest, observed: “Only about 20 percent of Ukraine’s exports are directed to the EU, while it ought to be about two-thirds, given the proximity and size of the EU market. … Three quarters of Ukraine’s exports are so-called sensitive products, notably steel, textiles, food and chemicals ? that are very difficult to export to the EU because of protectionist tariffs and regulations.” Russia remains Ukraine’s single trading partner. And millions of Ukrainians will continue to live and work in Russia (and one exit poll suggests that 75 percent of Ukrainian expatriates in Russia voted for Yanukovych) ? even though, in the wake of the Van Gogh murder in the Netherlands, one would think that Europeans might see the advantages of having guest workers from former Soviet republics.

I’m not sure I agree with that diagnosis–Ukraine’s exports were never competitive in the late 1990’s when I was there, so I doubt that trade barriers were the only problem here. The bigger problem was the slow pace of economic and political reform. In contrast, Bulgaria, Poland, Slovenia and yes, even Albania were modernizing their economies and legal systems fairly rapidly while Ukraine changed slowly. Then over the last 3 years, Ukraine has been caught in a long continuous scandal involving a murdered journalist, various charges of corruption and political manipulation of the media which made it impossible for Ukraine to move fast.

That said, the younger generations of Ukrainians (the ones I talked to anyway) have moved away, finding jobs in the west (however menial). The reason? Jobs simply didn’t exist in Ukraine. There were too many rules, too much bureaucracy, too much stifling of modernization, too many people dependent on the old patronage system.

When a generation or even a people feel absolutely powerless, they resort to more drastic forms of opposition. So far the opposition in Ukraine, George and even Yugoslavia have been relatively law-abiding, and even despised leaders like Ukraine’s Kuchma have an unwillingness to fire the first shot. In a country under 5 or 10 million people, protests can overtake political realities, and things can move rapidly. In Ukraine, a country with just under 50 million, even a determined populace may find it difficult to overcome political paralysis.

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