Sources of Long Term Growth
Edited by Gur Ofer and Richard Pomfret
Chapter 4: Ukraine: the lost decade . . . and the coming boom?
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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