Politics first in Ukraine

Readers' Views No 236, March 2003
OECD Observer

Your article, “Ukraine: A miracle in waiting?” (OECD Observer No. 234, October 2002) identifies the problems preventing Ukraine from realising its considerable potential. It also notes the positive changes introduced by the reformist government appointed three years ago and maintained – at least in part – by that government’s successor.

The article did not, however, emphasise sufficiently the role that a dysfunctional political system has played in slowing the pace of Ukraine’s transition. In fact, the causality suggested by your article – namely that a stronger economy would help to embed democracy – is open to question.

The opposite is arguably more likely to be true, with Ukraine’s economic fragility appearing to stem in large part from its woeful progress on political reforms.

Your article hints at this, and even catalogues Ukraine’s political deficiencies in some detail, including corruption, cronyism, incompetence and the existence of a governing elite more interested in controlling the economy than in opening it up.

However, strong rates of economic growth would be unlikely to hasten the reform of this system, and would most likely prove unsustainable over the medium term.

For instance, the unprecedented economic expansion in 2001, which was largely a result of one-off factors, slowed sharply in 2002, and did little to prevent the further erosion of political transparency – let alone the reversal of key reforms opposed by politically-connected interests in the coal and energy sectors.

These setbacks confirm the need to examine the direction of causality between economic growth and political reforms. It is considerations like these that make it hard to raise our low credit rating for Ukraine.

—Stuart Hensel, The Economist Intelligence Unit, London

©OECD Observer No 236, March 2003

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