The Transition of Ukraine's Economy

Abstract

Ukraine's socioeconomic crisis has been developing for years and has resulted in open sociopolitical turmoil and armed conflict. The population did not condone the goals of post-Soviet transition. Citizens grew disillusioned with their government and eventually lost faith in the future of their country. The role of workers' remittances in Ukraine's economy is often underestimated, although private consumption and stability are strongly connected to them. Social inequality and oligarchic control of key national assets has contributed to instability and uneven regional development. Due to prolonged underinvestment, economic growth has been slow. Improving growth is contingent on complex institutional reforms, macroeconomic stability, open external markets, and consensus among the elites. Recovering after a protracted socioeconomic and political crisis will require not only time but also improved governance, updated institutions, and a revitalized investment climate. Taken together, this can be called the second start of Ukraine's transition.

Keywords::

• Ukraine
• development
• economic crisis
• transitional period

Keywords::

• O15
• O21
• O52
• P21
• P23
• P26

This article is the republished version of:

The Transition of Ukraine's Economy

Notes

^1. The term “Maidan” refers to extreme civil unrest and dissent, mainly in the capital and other specific regions. It functions as a kind of “direct popular democracy,” which replaces constitutional bodies in the struggle between political parties and movements, and usually occurs in the context of a power dichotomy, paralysis of formal government institutions, and under the influence of the private interests of oligarchs (as in the earlier urban uprisings). This state of affairs was often observed earlier, during the political struggles of Europe's major cities, particularly Paris, the Italian cities, and in Eastern Europe—during the veche conflicts in Novgorod and Moscow in the 1500s. Today, such an institution (with its highly controversial legitimacy) is an anachronism, and its continued existence is reflected in the popular conviction that the government is wholly inefficient. The external (foreign) legitimization of these power shifts and changes to the “rules of the political game,” and the involvement of oligarchs, points to the weakness of this political system.

^2. “Billionaires Putting on Weight Each Year,” Areppim AG, March 12, 2014, Bern, Switzerland; available at http://stats.areppim.com/archives/insight_richxgdp_2014.pdf. Even in Russia, the top 111 oligarchs comprised “only” 20 percent of GDP in 2013.

^3. National Bank of Ukraine, Remittances in Ukraine, according to the Balance of Payments and International Investment Position Manual, 6th ed., 2014; available at www.bank.gov.ua/doccatalog/document?id = 80651/.

^4. “Natsbank Ukrainy prodaet rezervy dlia spaseniia grivny,” Vesti Finance, August 14, 2014; available at www.vestifinance.ru/articles/45717/.

^5. “Ukrainskaia aviatsiia nikak ne mozhet vybrat'sia iz kirizisa,” Kapital, July 15, 2014. www.capital.ua/ru/publication/24794-svobodnoe-padenie-ukrainskaya-aviatsiya-nikak-ne-mozhetvybratsya-iz-krizisa/.

^6. “Bezrabotitsa v Ukraine mozhet vyrasti do 10%—eksperty.” Segodnia, July 16, 2014. www.segodnya.ua/ukraine/bezrabotica-mozhet-vyrasti-537018.html.