Political and Economical Musings

By Walter Kish

This has been an interesting few weeks for Ukraine in the context of world and European politics.  The most notable event of course, was the meeting of the NATO powerbrokers in Romania where Ukraine and Georgia were told that NATO wants them in the fold, but not just yet.  The pessimistic interpretation is that President Putin and the Russians succeeded in intimidating NATO, and Germany in particular, into vetoing Ukraine’s NATO ambitions.  The pragmatists view the delay more as the Europeans refusing to give a lame duck US President Bush a foreign policy victory as revenge for his reckless and unilateral great power adventurism on the world stage.  I tend to agree with the latter view. 

What the whole affair illustrated beyond any doubt though, is the unchanging nature of Russia’s irredentist, imperialism.  According to a Moscow Times report, during a private meeting with Bush, Putin is quoted as saying “Do you understand, George, that Ukraine is not even a state?”  Further, according to the Moscow Times, “Putin has threatened to encourage the secession of the Crimea and the Russian-speaking, pro-Moscow eastern part of Ukraine if Kiev decides to join NATO.” The more Putin tries to spin that Russia is different from its Soviet predecessor, the more its actions tend to prove the exact opposite.  Such behaviour, of course, only provides more justification for Ukrainians to join NATO. 

President Yushchenko, unfortunately, is too inept to take propagandistic advantage of such reactionary posturing on Russia’s part.  He appears to be too pre-occupied with trying to do everything he can to scuttle Prime Minister Yulia Tymoshenko’s ever increasing popularity by throwing monkey wrenches into any and all of her program initiatives.  There is a virtual undeclared war between the Presidential Administration lead by Yushchenko’s odious Chief of Staff Victor Baloha and Tymoshenko’s government.  It is hard to believe that officially they are allies.

It has now been some two years since Ukraine had anything resembling a stable government, and some would say it’s been four, not two.  Remarkably though, despite the political chaos and anarchy, the Ukrainian economy does not seem to have suffered.

Official statistics released recently show that Ukraine’s GDP grew some 7.3 % in 2007, a rate that placed it amongst the top performers in the world.  Over the past five years, Ukraine’s economy has grown on average by an impressive 7.8% per year.  It seems that in Ukraine, regardless of what happens or doesn’t happen in the hallowed halls of the Verkhovna Rada, the world of business is flourishing.  Further, the fiscal deficit of some 1.1% of GDP and the external trade current account deficit of 3.2% of GDP is amongst the lowest in the region.

Of course, the increasing prosperity does not necessarily benefit all Ukrainians equally.  The oligarchic elite continue to grab the major share of the new wealth, as high levels of corruption continue unabated despite all the official rhetoric.  Nonetheless, real disposable income grew by an average of 12.8% for the typical Ukrainian, even in the face of an almost 17% consumer inflation rate.  This was borne out by growth in retail sales of 29.3% and a 15.8% increase in construction.

Although economic growth is expected to moderate in 2008, it will still remain high compared to the G7 countries.  A well educated and skilled labour force combined with some of the lowest wage rates in Europe will continue to drive strong economic growth.  And though Ukraine continues to have serious energy supply problems, it is virtually self-sufficient in almost all other natural resources, giving it significant competitive advantages.

So, Ukraine continues to stumble along its way to becoming a mature European state, both politically and economically.  It has definitely not been the straightforward and determined path that most Ukrainians had hoped for, but for the moment, Ukraine is still heading in the right direction with no shortage of detours along the way.