Beyond How Ukraine Became a Market Economy and Democracy – Aslund Anders

By John Pidkowich

Post Communist transformation expert Dr. Anders Aslund recently discussed his newly published book How Ukraine Became a Market Economy and Democracy and delivered a presentation looking at the post-Soviet state beyond the book, in light of the current global economic crisis, taking Ukraine from today into the future. The talk was organized jointly by the Canada Ukraine Foundation and the Canada Ukraine Chamber of Commerce, held at UNF Trident Hall in Toronto on April 7, 2009, with welcome and opening remarks by CUF President Bohdan Onyschuk.

Dr. Aslund has been heavily involved in observing and advising on Ukraine’s development since 1985, following the country’s protracted and socially costly post Communist transition as an independent state into a democracy and its transformation into a market economy with predominant private ownership. He was one of the founders of the Kyiv Mohyla Academy School of Economics. In 2004, he co-chaired a United Nations Blue Ribbon Commission for Ukraine and has written proposals for the President under A New Wave of Reform. Most recently, he has testified at the European Parliament regarding Russia and Ukraine.

Dr. Aslund has co-edited Economic Reform in Ukraine: the Unfinished Agenda (2000) and Revolution in Orange (2006).

Dr. Anders was introduced by colleague Michael Zinchuk, who approached George Soros and helped set-up the Renaissance Foundation in Ukraine. In fact, Renaissance provided the first retainer for Dr. Aslund to become an economic advisor to the Government of Ukraine from 1994 until 1997. During this period, Ukraine’s first President Leonid Kravchuk was followed by Leonid Kuchma being elected to the presidency. At the time, Ukraine was unfamiliar with writing proposals for program assistance from the West. Aslund and Zinchuk wrote Ukraine’s first program proposal for financial assistance from the International Monetary Fund. Ukraine’s Minister of Economy Roman Shpek and President Kuchma simply reviewed the proposal and forwarded it to the IMF. Subsequently, Ukraine was awarded its first IMF agreement and transfer of funds to implement the country’s change from the coupon system to the Hryvnia as its currency.

Dr. Aslund’s How Ukraine Became a Market Economy and Democracy accounts for Ukraine’s political and economic transformation as an independent nation state, regained status since 1991 and a chronology of its evolution over diverse regions and historic background. Political leaders who formed regimes have been identified and the central role they played in the country’s development as dramatis personae.

Dr. Aslund began his talk by stating, from the Former Soviet Union (FSU), Freedom House affirms that, contrary to Russia, Ukraine is the only state with a democracy, becoming full-blown with the Orange Revolution. In his talk, Aslund proceeded from his analysis in the book on how constant governmental transitions have affected the electoral process. The current political equilibrium attained by Ukraine has its advantages and problems. Today, Ukraine has three major centre-right parties leaning more towards eponymous blocs rather than representing distinct political parties with clearly articulated policies. Albeit, Aslund notes that possibly only the Communist Party of Ukraine has a well-defined political position and policies! A significant problem is that nobody can govern the country effectively – the President regularly vetoes decisions made by the Prime Minister and there is substantial corruption throughout the political system at various levels.

Aslund then goes further beyond his book to pay some attention to look for what is happening in Ukraine. Although Ukraine has achieved a parliamentary based system, more constitutional changes would approach a full parliamentary system where the President is elected by Parliament and not by popular vote in a general election. The upcoming Presidential Elections slated for October 25, 2009, should certainly be interesting, given that Yulia Tymoshenko and Victor Yanukovych (as well as others?) are contenders. Worth following further is Ukraine’s dynamic market economy and economic “cleansing” during the global economic crisis in the foreseeable future. Delayed market reforms have been costly, however, they are still in the right direction for the desirable outcome. Particularly, two radical reforms occurred in 1994 when then President Kuchma stopped hyperinflation and in 2000, when then Prime Minister Victor Yushchenko implemented a full set of reforms.

Aslund continued his PowerPoint presentation with emphasis placed on economic statistics and informative graphs about Ukraine’s hard-hit economy with its problems and a solution – an IMF program that requires a government imposed austerity measures on the population. Issues discussed were about Ukraine’s budget deficit (approximately 3% of GDP), the country’s economic output and sufficiency in foreign reserves, the presence of foreign banks and their willingness to refinance debt, and the big losers in the current economic downturn – Ukraine’s oligarchs in the steel industry and business elite.

Aslund added his foreign policy commentary and position that Ukraine has little choice but to turn West, in light of Russia’s “hostile” policy on Ukraine. Ukraine’s recent membership in the World Trade Organization will help exports, European association agreement would provide financing, and a National Action Plan with NATO would offer security, territorial integrity and overall stability.

Aslund stated that Canada’s impact on Ukraine’s economic and democratic development has been beneficial, providing bilateral financing, engagement in Ukrainian energy reforms, 200 annual scholarships at the Kyiv Mohyla School of Economics, and negotiations toward a free trade agreement between the two countries.

The evening concluded with a panel commentary and debate of issues presented by Dr. Aslund, with participation by CUCC President Zenon Potichny, government relations consultant Lubomyr Kwasnycia and Mohyla Business School lecturer Vasyl Kalymon.

How Ukraine Became a Market Economy and Democracy will be published and cost $20 USD plus $7 shipping. For book order information, emailnfullenkamp@petersoninstitute.org