Last year was a time of recovery in Ukraine from the long years of no reform. It was also a time of domestic crisis, as the country’s new leadership rejected so-called hands-on management, and a time of foreign crisis in Kyiv’s relations with Moscow, as these relations were brought out of the shadowy backrooms where deals had been in previous years cut at the expense of Ukraine’s national interests.
Taking this into consideration, it is ironic that Ukrainian President Viktor Yushchenko is being accused for the second time in his political career of “destabilizing the economy.”
Back in 2000, when he served as prime minister, the charge against him was that the elimination of barter arrangements would destroy Ukraine’s economy. Mr. Yushchenko’s government dismantled the barter system anyway. As a result, the budget began to see real money, pension and wage arrears began to be paid for the first time, the economy recovered, and a five-year economic boom began.
The same charges can be heard today: President Yushchenko has supposedly destroyed the economy because he is making people pay taxes and has stopped businesses from abusing the tax breaks provided by free economic zones; that he’s causing inflation because he raised the minimum wage and pensions, daring to increase salaries in the public sector so that bureaucrats wouldn’t have to take bribes to make a decent living.
Every decisive act entails a risk. Even having your appendix removed can be dangerous: Your abdomen looked fine from the outside, but now there’s blood everywhere and it could become infected. But that doesn’t stop people with appendicitis from going to a surgeon, because they are well aware of the alternative.
President Yushchenko inherited an organism with a well-advanced disease spoiled by unhealthy habits. This made surgical intervention all the more difficult and outpatient care even longer. The fever is high, the tissue inflamed and the body politic wants painkillers. As for the patient’s relatives, they are screaming bloody murder at the doctor for cutting into their kin.
With an economy, all of this is much more complicated, and the average citizen does not necessarily understand the consequences of not taking decisive steps. Ukraine has a state budget that bears no relation to any economic or political strategy, and a parliament that has violated the nation’s budget law for years, racking up program expenses that were never planned.
The wholly “greasy” hands-on management of the economy, which many openly called a free-for-all, offered no protection of property rights, and no fair competition — not even the possibility for some kind of strategic development. Big business operated in a special, hyper-spending mode, giving no thought to its social responsibilities, or for that matter, to its own future in an increasingly competitive world.
Yushchenko’s strategic moves have been precise and follow two basic rules: (1) they reject all forms of privilege, which inevitably spawns corruption; and (2) they ensure social support for the most vulnerable people within society. These steps have already led to a sharp increase in budget revenues. The new leadership has rejected hands-on management and started work according to the rules. One brilliant result was the impressive resale of the Kryvorizhstal steel mill.
Decisiveness is also evident in the state’s preparation for radical restructuring of the civil service, the weakest link in the new administration. A presidential decree separating political and administrative positions offers some hope that forthcoming constitutional reforms will not threaten the nation’s stability.
The Yushchenko administration’s success is ultimately guaranteed by its righteous and honest motives, while the reforms that it introduces in the judiciary branch, the area of property rights protection and the policy-making process will serve the opposition just as well.
Vira Nanivska serves as director of the International Centre for Policy Studies, a Kyiv-based think tank.
