The Economic Prospects of the CIS

The Economic Prospects of the CIS

Sources of Long Term Growth

Edited by Gur Ofer and Richard Pomfret

This book brings together ten original studies on the transition and growth experience and the foundations for long-term growth of the newly independent states created by the dissolution of the Soviet Union.

Chapter 4: Ukraine: the lost decade . . . and the coming boom?

Olexander Babanin, Vladimir Dubrovskiy and Oleksiy Ivaschenko


Olexander Babanin, Vladimir Dubrovskiy and Oleksiy Ivaschenko 1. INTRODUCTION At the beginning of transition many experts forecasted a rosy prosperity for Ukraine’s economy. As soon as Ukraine had broken the records for hyperinflation and for economic decline for a country not involved in a military conflict, the very same experts started to blame everyone for the collapse of the economy. Among the culprits the following were named: ● ● ● ● Russia, for the increase of energy prices and the policy of discrimination against Ukrainian goods; the reformers for poorly designed reforms; the communist nomenklatura for opposition to the reforms; and finally, the West for the imposition of economic and social models allegedly alien to Ukraine, and for insufficient financial aid. While the authorities were sluggish in implementing market reforms, the bureaucracy was pretty active in imposing discretional regulations that strengthened its own ‘grabbing hand’. As a result, the reforms were extremely slow and inconsistent. A number of structural and institutional factors made the initial position of Ukraine less favourable than that of other transition countries. Firstly, Ukraine is an extreme case of over-industrialization in large-scale enterprises, energy-intensive and military production sectors, and heavy dependence on energy imports. Secondly, Ukraine did not have a proper government for many years, the best people immigrated to the SU and to Russia, and the domestic ex-Soviet elite of government officials, academics and enterprise managers was mediocre and unprepared to deal with the changes. At the start of the transition Ukraine had the highest...

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