The economic news this week touches on issues that illustrate how the Ukrainian economy actually works and why it works so badly. First of all, there is the superprofitable fossil fuels market which has been divided up so thoroughly among politically connected oligopolies that no outside forces are allowed anywhere near this sector. The National Security and Defense Council merely decides which entity will be allowed to purchase how much, and then they resell it to regional monopolies. Any resemblance between this and a market economy as understood in the West is, needless to say, purely coincidental. Who “they” like can do business, reap monopoly profits through political protection, and everybody else had better get out of town. “They” might be government ministers or local officials; there is no single “they” but a bewildering tangle of administrative industrial groups of those with power and wealth.
Now the same thing seems to be happening in metallurgy. The Cabinet has halted all exports of scrap metal and is auditing the firms in this sector. Of course, the ones “they” like will have a much easier time than those they don’t. When he puts his mind to it a Ukrainian inspector will find violations everywhere or at least drag out the process long enough for the unloved business to go broke. In other words business is allowed to make money only as a fiefdom of those who have political power, and the businessmen owe fealty to their political protectors in a process wrapped in virtually complete opacity. And since the authorities protect these industrial feudal lords from competition, they are free from worry about things like efficiency. And the whole thing remains inefficient, unproductive, and most people stay poor. In other words, twentieth century production technology has wedded itself to medieval techniques of organization, and the whole ramshackle machine seems absolutely incapable of any kind of progress.






