“We are the cause of all our troubles”

Unexpected conclusions, paradoxical statements, such as “I dream that Ukraine will be a poor European state,” “go to courts and lose,” “Kuchma was a pure ‘red manager’ who hated privatization,” and “the current leadership is socially insensitive and inefficient,” – all this could be heard during an interview with the well-known economist Oleksandr Paskhaver at the Summer School of Journalism.

As we have already mentioned in the announcement, Mr. Paskhaver, a longtime subscriber and contributor to Den, confessed somewhere in the middle of the interview that what prompted him to come to the editorial office was a very important idea – the expert, who participated in almost all the socioeconomic and political transformations in Ukraine, seems to know the recipe of how Ukraine can become a state in which it will be comfortable and safe to live honestly.

Our meeting began with a provocative ad lib of our interviewee.

Oleksandr PASKHAVER: “I am supposedly an economist, but I have lost interest in purely economic matters. When the state is ineffective, the economy very much depends on non-economic factors.

“The current economic problems (for example, what the hryvnia’s exchange rate will be in a month, whether it is right to ‘pump’ people with money, whether it is so good to raise customs duties) are being addressed here in somebody’s interests. You can’t possibly reflect on this without saying: ‘And in whose interests is this being done?’

“I’ve been working with this country’s topmost officials for over 20 years. I was an adviser to Kuchma and Yushchenko, and I can say with certainty that the attempted reforms did not come up to expectations. The dynamics of our development reveals degradation and de-professionalization of the bureaucracy. What we see now is more overt commercialization of the government in comparison to, say, the first one. But the latter did not consist of ‘angels’ either.

“What we have ‘built’ is called natural state. It can be defined as collusion of the elites aimed at reaping profits. To this end, they monopolize all the profitable and important sectors, including, incidentally, the media.

“The author of this concept is Nobel Prize winner Douglass North. If you read his book, you will gain an impression that he describes Ukraine even though he is absolutely uninterested in it.

“Scolding the government is rather a mindless job. I usually say figuratively that the government is a teenager who keeps trying to broaden the boundaries of his responsibility, while society, as an adult, sets and controls these boundaries from inside. If the ‘teenager’ overplays, he is not to blame – he was allowed to do so, the ‘adults’ poorly educated him.

“So one must drop economics and, instead, deal with society.”

Alla DUBROVYK: Did you lose interest in pure economics at a specific moment?

O.P.: “This country has been following some international advice for 22 years in order to develop and switch from socialism to capitalism.

“The first concept was drawn up back in the Soviet era – the World Bank’s Washington Consensus. The idea is that if you apply such a ‘triad’ as privatization, free prices, and financial stabilization, to the ‘ill-fated’ socialist countries, the project itself will create financial structures if necessary. As time went by, the World Bank saw that this was not happening. Something was being created, but this ‘something’ ran counter to expectations: criminal, corrupt, monopolistic, and imperfect markets. This was followed by a different concept.

“But we were implementing all these recommendations in good faith.

“Then there was Washington post-consensus. The essence was to first establish good institutions for society.

“Many years have passed. The attempts to introduce these institutions gave no results. It turned out that all the institutions only worked to suit the people who were close to the government.

“And then I recalled North who wrote the book Violence and Social Orders. I advise everyone who is interested not so much in economics as in our life to read his book. In my view, it explains very many things in our life, for example, why a Western person is surprised with the high level of corruption in our society. But in a natural state, to which we belong, corruption is the backbone of its activity.

“In our country, too, different governments have behaved differently at different periods. The current government is just unusual. It does not hide the proportion and is saying bluntly to all individuals that their main goal is to reap the ‘rente.’

“This kind of state was created in ancient times, and it used to be only type. It was created in exchange for reduced violence – in fact to legitimize the latter. In exchange for this, whoever could do so received their rente.

“But there is an exception: the West. The book Culture Has an Impact explains how it managed to do so. It says that countries differ from one another by mentality and national character. It is this character that decides on what institutions there are and how the market works.

“Marxist and some other theories believe that countries only differ by the time of development – in the course of time, every country will pass a certain way. Other countries have passed this way successfully. But all this turned out to be not so optimistic. If one side has an unsuitable culture, it will just not work, it will solidify in this miserable condition.”

A.D.: Does Ukraine have an unsuitable culture?

O.P.: “Unsuitable. That’s the problem.

“We are a European country. Our values are European. But our attitudes and behavior seem to be divided between the Eurasian and West European civilizations. The entire Eastern Europe, not only we, is between the two poles.

“The culture, standards, motives of behavior, attitudes, and stereotypes created by the West European civilization helped accumulate wealth. But the culture shaped as part of the Eurasian civilization could not give what we want now.

“Ukraine is in between, which in itself means uncertainty. Any public opinion survey, even if the question is ‘What color shoes would you like to wear?’ is bound to divide the respondents approximately in half.

“In reality, there are a lot of countries like ours. We are just worse. This can also be explained. Ukraine had no statehood for three centuries. Being in this situation shaped the character. This was especially the case in the Soviet era.

“A foreign state is an institution to which you are estranged or hostile, you do not believe in its laws and do not think it necessary to obey them always. You do not abide by the law ideologically. We have learned to live, as if we were estranged from the state. We do not trust the state and its institutions. Besides, the most productive strata of our population were eliminated in the Soviet era. We were subject to national marginalization. This resulted in a character that can be called ‘strategy of survival.’ It is aimed at keeping the family stable. A national character like this is very unsuitable for building a state.

“To build a state, one must at least believe in one. We do not trust in general any social groups larger than our family and neighbors. We are amoral for the sake of salvation, and we are ready to break the law and morality for the wellbeing of our family. We regard corruption as sin, but as an admissible sin if it benefits our family.”

A.D.: What is the way out? ‘Forty years in the wilderness’?

O.P.: “The wilderness will give no result – even if it is 500 years. The question is not in this. For Moses not only led people in the desert but also brought them up very well.

“If some of us hope that a change of government will change something, it is futile. We will generate a government that looks like the previous one. We must ask ourselves: ‘There are enough honest people in the world and Ukraine. Why do we elect dishonest people although we are not under occupation? What makes us elect dishonest people? Does anybody force us at gunpoint to vote for these people? We and only we vote, by force of our character, for those who we think are the right people. This is the trouble. Hence, we should look for a way out right here.

“We can consider two positive scenarios. One is passive. The crises caused by the state’s ineffectiveness encourage ‘venal’ elites to carry out reforms even if they do not want them. Ukraine saw three waves of these reforms. And, in principle, we can expect that, if nothing special happens to us, we will become sort of a mature natural state a hundred years or so later.

“The other positive scenario is the most attractive in my view. It seems to me that a certain – not necessarily young but mainly young – part of Ukraine’s population will feel that people need to be changed on an individual, rather than societal and institutional, level. For we are the root cause of all our troubles because we are not used to doing things the way West Europeans do. I say it again: to do things rather than debate over a dinner table. We consider any wealth dishonestly obtained. Moreover, as we think so, we reproduce this attitude. This is a forecast that has come true. But things are different in a market economy, when whoever earns money also allows others to do so. We also think it is not worthwhile to fight against a concrete misdeed. Suppose a traffic policeman misbehaved and we have sued him. We know only too well that we will lose the case. Even if millions of people sued, the court system would not improve, but this would trigger a crisis that would call for reforms.

“The question is how to make us act otherwise. Then this vicious circle will begin to get rid of vices. How can this be done? It is not so fantastic. We must stop debating and lecturing others and swear to each other to act the way we should.

“It is enough to have 7 to 10 percent of people who have a certain point of view in order to change society.”

A.D.: Is the EU Association Agreement, which Ukraine, God willing, will sign in the fall, a good chance for us?

O.P.: “Yes, it is a positive external factor. But it would be wrong to think that, when we join the EU, the latter will ‘reeducate’ us. It is more likely that they will be ‘fed up’ with us and will throw us out.”

A.D.: And what impact may Customs Union membership have on our development?

O.P.: “This is a different type of behavior.”

A.D.: What does it mean for us?

O.P.: “For me, it is unacceptable. Russia has been developing like a bicycle. She felt good when she was expanding. Every time she stopped expanding she began to disintegrate. Accordingly, such a mobilized population is not inclined to make peace – it is inclined to commit aggression. People of this kind are not disposed to wealth, for they consider it a sin.

“If we draw up a table of virtues from the viewpoint of a Western burgher, each of these virtues will correspond to a sin from the Russian viewpoint.

“And if you like this type of behavior, please do so. It is a matter of choice, and I cannot say that this is bad and this is good. I will only say that, for me, it is a catastrophe. I was brought up in the European paradigm.”

Tetiana AVDASHKOVA, Taurida National University: Can Ukraine create an economic model of its own?

O.P.: “God forbid we try to create an economic model of our own. I read many of my colleagues, and they say: ‘What are we to do with Europe? It is going to bite the dust, and they do not suit us politically. They have too many social problems and their economic development is slow. Let us invent a better, our own, one.’

“I think that, firstly, the word ‘invent’ is out of place. A model can only be created by nature. But we are on the social and economic fringe of the world community. I once expressed an opinion for which I was severely chided in 1991. Asked what kind of Ukraine I would like to see in the future, I said that my dream was that we should become a poor European country. When we become a poor and then a rich European country, we will be able to take a most active part in drawing up a new model.”

Olena ZASHKO, Donetsk National University: The problem of shale gas production has triggered almost a war. There are both proponents and opponents of this initiative. What impact do you think shale gas production will have on this country’s economy?

O.P.: “If it could be produced in large quantities, this would of course make it easier to live in our concrete conditions.

“But, in general, a resource-based view of the economy is a view of backward people. The world’s richest countries have no resources at all, while the poorest counties are full of resources. A colleague of mine reflected yesterday on the future of Ukraine and said that we are awfully lucky not to have oil – otherwise, there would be a revolution.”

A.D.: And land?

O.P.: “Our land does not yet have the liquidity of oil in Arab countries. But, in principle, this resource can also become very ‘dangerous.’

“Shell promises to work here the way it does all over the world. I doubt this. Let me give you a simple example. The World Bank once offered to fund the closure of commercially unviable mines in the Donbas. It allocated money for the pit closure equipment and for social support to those who lose jobs. Five years later the World Bank asked my center to tell them whether or not they should continue. Analyzing the situation, we found that all the social support funds had been embezzled and the populace had been told that the World Bank was forcing the management to close the mines. Those regions associate the World Bank with the devil.

“So when we speak about abrupt structural changes associated with shale gas production, let us first try to change ourselves.”

Kostiantyn HONCHAROV, Kyiv National University: Unemployment is now one of the European Union’s most pressing problems. What impact do you think this factor will have on the world and Ukraine in particular?

O.P.: “As I am saying that my dream is to see Ukraine a European country, your question is, of course, much to the point. Well, are we heading for a ‘decaying’ union?

“Everybody can say it is a very unusual crisis. But I must tell you that even the Great Depression played into the US hands. The depression revitalized America. Of course, the very system of capitalism presupposes that a boom is followed by a crisis and people suffer. But it is a human nature. And do people not suffer in some other, crisis-free, places? If you take Soviet history, it was, sorry, a never-ending crisis. We had no crisis only in the Brezhnev era for the simple reason that we ‘fed’ the populace with oil. We were, in a way, a Saudi Arabia of sorts in those two decades.

“Now about the crisis in Europe. It is a structural and social, not only economic, crisis.

“The problem is the European model of a social-oriented economy has overdone it with social security. In general, the living world is cruel. We are all part of food chains. So I think it was a mistake of European civilization when affluent countries decided that they could provide security for people and the latter could cease to feel mobilized. Incidentally, US President Obama wants now to do the same, and a lot of Americans think this will be a disaster. I think Europe will eventually reduce the level of security and, accordingly, unemployment.

“Do you know what unemployment looks like in Europe? People do not want to work. The pendulum has swung too far towards security. They find it very good to live in this situation. And it will be a heavy psychological crisis for them when they have to lose all this. But they will have to. And they are wise enough to do so.”

Tetiana MATSKEVYCH, Lviv National Ivan Franko University: In an interview three years ago, you described the new leadership’s course as follows: ‘They are resolute and energetic enough to achieve their goals, they know how to carry out successful projects. In general, they are more efficient than the previous leadership.’ What are the practical results of this ‘energy’?

O.P.: “They are very resolute and energetic in achieving their chief goal. I read yesterday that the company run by the president’s son had increased its profits by 26 times. Is this not efficiency? Is this not energy?

“But, firstly, they are socially incompetent. They have the mentality of a medium-scale manager in an industrial area.

“Secondly, they are not ashamed. The previous ones were ashamed to embezzle, but these are not ashamed.

“Thirdly, they are dangerous by their mentality of managers, for they believe that monopolization is a good thing. Do you remember what Azarov said when he was told: ‘But, as a result, this will impair small-scale business?’ ‘Let then go to work at big factories.’ This is their mentality.

“I fully confirm what I said then. They are conceiving colossal projects. They are concentrating everything. This scale was unthinkable for their predecessors. Look, for example, at the way they are fighting corruption. They are including ‘base-level’ corruption into the budget in order to divide it between a few groups. It is easier than to collect a hryvnia from every policeman.”

Roman HRYVYNSKY, National University of Kyiv Mohyla Academy: You are saying you wish people to take legal action. But I think it will be difficult to motivate people to do so because they can always see that the court is not fair and will never hand down a ruling in their favor. Is it then perhaps worthwhile to abstract away from the state and set up some primary units that would assume the functions of the state?

O.P.: “Having the worst government is better than having none.

“Go to court and lose but take the matter to the end. And if there are very many of you, the judicial system in its present shape will just burst. It will not hold out if there are many of you.

“Antiracism in the US managed to change society within 20 years. It was next to impossible to imagine in the 1960s that a white woman could walk arm in arm with a black man in public, but it was quite normal as soon as in the 1980s. And what did they do? There was once a slogan among the blacks that every respectable person should do a prison term.”

T.A.: The last question is about the economy but about you personally. You are a longtime reader of Den…

O.P.: “As a subscriber, I read it daily.”

T.A.: What do you think is the difference between Den and other Ukrainian newspapers?

O.P.: “It uses a refined language and is not boring to read. I subscribe to Den because it does not irritate me, as other newspapers do, with primitivism.”

A.D.: Incidentally, I recently read a study in Telekrytyka, if I am not mistaken, that newspapers go yellow in pursuit of print runs. And the trouble of such newspapers as Den is a narrow readership.

O.P.: “Yes, it is true. Our readers have been spoiled. We can see a certain intellectual degradation.”