Counting on Coal?

The vultures are circling over the heads of an outgoing government in its final agonies, and the usual suspects are positioning themselves to swoop down for a bigger cut of the pie from its successor. A particularly vivid example occurred with our being treated to the spectacle of a large number of Verkhovna Rada deputies going gown the pit to talk to miners and those who control the coal sector in Ukraine. Of course there are devastating human problems in Ukraine’s traditional mining territory, and with new investment some of those mines might be brought up to competitiveness, thereby saving jobs, but for most that is simply not an option.

Too many hard facts remain. For one thing, coal is not a renewable resource, and the sad truth is that in the fifty or a hundred years many of Ukraine’s coal mines have been largely mined out: of course there is coal still there, but not that can be got at competitive costs that would make it possible even to pay the miners what they are due. Great Britain addressed this problem during the Thatcher years. It was a terrible struggle, but the government won and once thriving mining towns are now scraping by assembling computers thanks to a government that was determined to cut the economic role of the state and let the businesspeople get down to making money for themselves (and indirectly for everybody else), which is what business does better than anyone else.

Another hard fact is that Western investment in traditional Soviet enterprises is a riskier business than smart businesspeople are likely to choose. There are simply too many cases where an investor thought he was buying something as his privatized property but when he tried to run it like a Western business in a way that might conflict with the interests of management, he was simply offered back his devalued hryvnias

The issue in simple terms is not about paying miners for their backbreaking, dangerous work but about continued subsidies for the lords of the coal industry. Even if the higher subsidies advocated by the coal lobby in the cabinet and allied ministry go through, the miners will obviously get something, probably less than they are due, and there remains a distinct possibility that a substantial amount of the loot will end up in offshore bank accounts of unclear ownership unless and until those who control such accounts decide to tap them. This has happened in many other sectors, and one can hardly expect coal to be cleaner than agriculture was a decade ago. It is how things work here. The problem is that they do not work very well, at least not for most people.