Over the past year, Western intellectuals seem to have stepped
over an invisible barrier separating their idea of the post-Soviet space
from what is really going on here. This resulted in the studies of virtual
statistics, then its virtual economy, monetary system, etc.
The Day's interlocutor, Janusz Szyrmer, Executive Director of
the Harvard Institute of International Development (HIID), recently visited
the HIID headquarters in the United States. So we first asked him about
his overall impressions of the trip. What are Americans saying about Ukraine?
Should we expect any modifications in the attitude of international financial
organizations toward Ukraine and similar countries? Has this intellectual
breakthrough effected the stance of the US Administration, IMF, and World
Bank?
"You know, it has always seemed to the Harvard Institute of International
Development that there is a certain symmetry between the Ukrainian government
and its Western donor organizations. We think the government has no clear-cut
concept of their country's development: what to do and how, which reforms
to carry out now and which later on, etc. This a serious problem. We see
that Ukrainian policy-makers work very much and very hard. But they almost
exclusively deal with current, short-term, problems. We have noticed insufficient
long-term work aimed at fulfilling a clearly-defined overall concept.
"However, the other side, the donor organizations, also lack a well
thought out long-term concept. These people regularly come here and give
some help for better or worse. But this is mostly technical assistance.
There were and still are no impressive and crucial successes. We know that
exactly the same problems also existed one, two, and three years ago. However,
the situation was noticeably better two or three years ago. I have said
very much about this in the US, and almost everyone agrees with me: the
West does not know exactly what to do with Russia and Ukraine. It wants
these countries to develop toward democracy and a market economy. At the
same time, it is obvious there is no progress in this direction. Billions
of dollars come to Russia and Ukraine. But most of this money either vanishes
or winds up in private accounts in Switzerland and other countries."
"In other words, those who were supposed to prompt us into finding
the best way to carry out reforms are themselves not very sure how to do
it. But are they just continuing to advise something and promise to give
loans to at least formally carry out this advice? The Ukrainian party,
too, continues to try to fulfill, at least formally, the programs it has
signed."
"The West is already aware of the need to change something in the strategy
and methods of helping the countries of Eastern Europe, especially Ukraine.
For the aid channeled to Central Europe has really helped those countries.
Western money has also helped South Korea. We believe the money will be
returned on time. Here we are optimistic. But we are pessimists concerning
Ukraine. Incomplete and inconsistent reforms can be carried out indefinitely.
What you will get may be neither a Soviet nor a market economy. It will
be something else. The ineffective economy thus created will complicate
the internal situation in this country. The West, unfortunately, does not
yet know what exactly to do."
"Your institute does economic research. Could you tell us what new
trends are emerging in the Ukrainian economy? Are there signs of some sectors
having sought and found a strategy of their own to survive in a market
environment? How can one explain, for example, that (by indirect indications)
housing construction in Kyiv is already making a profit: the construction
workers have paying jobs, people buy apartments, some people are furnished
with free accommodations, and the city budget now has some resources for
new construction? Are there prosperous enterprises in other industries?"
"What you are talking about is part of a more general problem, the absence
in Ukraine of conditions for normal economic activities. The market is
in essence a simple thing. People produce, sell, earn money, and repay
their expenses; if there is profit left, they can invest it, and this is
how an economy grows. The market also means that the participants in it
have no special privileges: the government cannot deprive one person of
something and award something to someone else, or impose taxes on some
but not on others. Who decides who must pay an import duty, who does not,
and why? What kinds of imports are more important should be decided by
the market: people buy the things they need and don't buy what they don't
need. Enterprises should work so that they always know their financial
capabilities; they cannot produce what is too expensive and thus won't
sell. In Ukraine, barter accounts for 40% of settlements. About 53% of
enterprises in industry and 90% in agriculture are losing money. Indebtedness
among enterprises alone has exceeded annual GDP. This means your economy
is not transparent. And if there is no transparency, I cannot answer your
question. The country has a lot of people and enterprises that work efficiently,
but we do not know exactly who. There are instances of virtual effectiveness
resulting from price distortions, tax privileges, or a simple doctoring
of the figures and indices. All I can say is that I don't know, you don't
know, and nobody knows how your economy works.
"I don't think your country utterly lacks enterprises that work very
well. Kyiv is a beautiful city with people mostly looking good. However,
the statistics say the Ukrainian GDP is almost that of Africa where people
live in poverty and even die of hunger. So something is wrong here."
"Quite often, the position of Western organizations is explained
by a certain inertia. There was allegedly a task earlier to help the postsocialist
countries move away from their socialist past as far as possible. And now
that the imperial threat has receded, we see financial injections gradually
diminishing."
"There may be an element of inertia here. But I think the main problem
is the short term nature of the problems being solved."
"If we speak of a model of development against the backdrop of dwindling
Western aid, could Ukraine be offered the pattern now existing in IMF-Russia
relationships? There the IMF makes certain the new loan is utilized to
repay debts to the fund. Then the country is set adrift to try to cope
with its economy on its own. In all probability, the property of large
companies and banks will be concentrated in the state's hands until economic
growth begins. Hence, liberal market reforms will be postponed, not without
IMF help, for decades. The world knows many example of such economic systems.
Latin America built a market by means of severe totalitarian regimes."
"Creating the market by totalitarian regimes can hardly be successful,
with Chile being the exception that proves the rule. It also seems to me
this model will just not work in a transition economy. Look at Belarus:
the state failed, no matter how hard it has tried, to ensure the sales
of the products it makes. This can be explained very simply: state-run
enterprises were not motivated to produce what people needed and what could
be sold. You should remember the principles of a self-organized market
economy. Both developed and developing countries have a mechanism forcing
enterprises to work efficiently. For instance, the Anglo-Saxon model assigns
a key role to the stock market. If a company works poorly, it makes little
profit and its shares fall in price. As a rule, low share price is a signal
for them to be bought out by a new owner. It is he who then makes a decision
about change of management, etc. After that, if the company recovers, the
shares get more expensive, and what he bought cheap may now be sold dear.
In Germany, a similar function is performed by big banks. They extend loans,
and their experts see to it that the money works effectively. Even in Poland,
in state-run enterprises there is a mechanism to influence management:
Polish trade unions will not allow the director to do anything he pleases,
and if he abuses his post for personal enrichment, Solidarity will have
him removed.
"In the 'scenario' you suggest, I do not see a mechanism forcing large
state-run enterprises to work efficiently. And there will be no economic
growth without effective economic performance. Decisions will always be
political in enterprises where the government itself controls managerial
decision-making. If there was any possibility of market control over the
performance of an enterprise, we could entertain some hopes. But if there
is no system of bankruptcy or changing managers and owners, it means bad
and inefficient managers stay on. And there is no motivation for the economy
to develop."






