itive change would come. The Western-leaning economist would institute reforms that would put the Ukrainian economy – still largely socialist – on a firm capitalist basis.
Maybe we were too optimistic. Sadly, the Yushchenko administration’s impulses so far have too often been consistent with Ukraine’s socialist past.
Consider an issue that was much in the news last week: the Economy Ministry’s putting limits on gasoline prices. The move was a response to recent jumps in export duties on Russian oil products, which could have a dramatic effect on a Ukrainian economy largely powered by oil from Ukraine’s giant neighbor to the north.
Unfortunately, the government’s response was the wrong one. It’s shocking that a country that wants to be granted free-market status and join the World Trade Organization is using state pressure to tell oil companies at what price they’re allowed to sell gasoline. In a crucial sector of the economy, the Yushchenko government has taken Ukraine right back to the days of the Soviet command economy.
The effects are already being felt. Ukrainians have been lining up for gas outside filling stations that – logically enough – are refusing to sell gasoline at the low prices the law demands. In Kyiv, it’s difficult to find gasoline at all. The government’s socialism has taken us right back to the scarcity days of the Brezhnev era. And observers could only hang their heads in despair when Fuel and Energy Minister Ivan Plachkov announced on May 13 that the Cabinet of Ministers would devise a special formula for calculating prices of petroleum products. A working group consisting of both government officials and representatives of Ukraine’s petroleum refineries was charged with coming up with this formula before the end of June.
Before the end of June? Not only is this an example of flagrant, Soviet-style interference in the economy, it also suggests that the authorities are in the price-fixing game for the long haul. But in a country that calls itself a market economy, there should be no government formula setting prices in the first place. Let supply and demand and market forces rule.
Meat matters
The government hasn’t only been sticking its hands into macro-economic matters – it’s been meddling in smaller stuff as well.
At the end of April the Kyiv City Administration had slapped price limits on meat. By law, a kilogram of veal could legally cost no more than Hr 30, while a kilogram of pork could cost no more than Hr 32.
But in what sort of free-market democracy does a city government tell merchants what prices they can set for their wares? Once again, this outrageous rule is reminiscent of Soviet days, when hard-working country people who wanted to sell their home-butchered meat could be called “speculators” and punished by law. This is no way to run a European country.
Tellingly, some merchants have reportedly responded to this price-fixing the same way they did in the communist days. They’re selling only their worst wares at the government-mandated prices, while the good cuts are kept and sold at market prices under the counter.
That’s what the authorities call getting Ukraine’s economy out from under the shadows?
Privatization trouble
Meanwhile, there’s the continuing confusion concerning privatization review. Last week, Deputy Prime Minister Anatoly Kinakh announced that the government had a new list of 29 former state properties to be renationalized. In a May 13 press conference, President Yushchenko reiterated these claims. This week, Prime Minister Yulia Tymoshenko denied rumors that the government has a new privatization list.
It’s hard to know what to believe, but that’s the point: this far into the Yushchenko presidency, Ukrainian businessmen still have to live under a vague threat to property rights. While it’s true that some privatizations were done unfairly in the Kuchma era, launching a witch-hunt against illegal privatizations will scare off foreign investors. That’s the last thing that Ukraine needs right now.
And then there’s the matter of Ukrainian customs authorities limiting the amount of money people can take out of the country. In a free-market economy, as opposed to a socialist one, it’s no business of the government’s what a person does with his legally-earned money, including take it out of the country. If a Ukrainian businessman wants to invest his money abroad, no democratic government committed to free-market principles has the right to stop him.
It’s still early in the Yushchenko presidency, and supporters of liberal economic principles don’t have reason to give up hope yet. But the government has so far shown a tendency toward creeping socialism. If Ukraine is to fulfill its promise, that has to end, fast.
Jed Sunden is the publisher of the Kyiv Post.
