Reports and Realities

The latest presidential missive to Verkhovna Rada was met with some deserved skepticism from the experts, especially when it comes to the growth forecasts for the Ukrainian economy. Obviously, the head of state might not always have time to write brochures for himself and some anonymous experts might be found to do it for him. But beware of the experts. For the right price one can find experts who will tell you anything you want and swear to it in a court of law. I still recall how the American Tobacco Institute was able to produce more Ph.D. medical researchers than you can count to tell you how smoking is actually good for your health and will never, never, ever cause lung cancer.

Consider here Tax Administration Azarov’s latest statement about who pays taxes and who does not. Private farms, for example, pay their taxes, and the remnants of collective farms do not. Nor do quite a few state-owned enterprises. One might ask why. One might even suspect that the interests of a director of something he does not really own is a bit different from those of an owner who has his own money at stake and either makes a profit or goes under. The director, unless an owner can replace him, has his basic economic interest not in profit but in what he can stick in his pocket through whatever scheme (barter, for example) he can agree upon with his accomplices in similar “enterprises,” insulating himself through his connections in the relevant ministry and other “informal” relationships. This system, somewhat broken in the lands really making their way toward European integration, remains alive and well in the former Soviet Union, where what exists on paper usually has only a passing relationship to what happens in real life. Recall also how Nikolai Bukharin once described the system Stalin built (and independent Ukraine inherited) as military-bureaucratic feudalism. Recall also all those foreign investors who have already had their fingers burnt trying to deal with post-Soviet enterprises and ponder why there might not be more foreign investment in an economy that could not only use it but make somebody a great deal of money, if they were not fleeced at the first wide place in the road. But, then, representative self-government is not always about the best decisions but about those in the interests of those with the clout to influence them. Moreover, the reality is that joining NATO will not help Ukraine with the European Union as long as it does not clean up its economic mess.

Could some of those experts from the old American Tobacco Institute have retrained as economists and come here?