Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

“We should recognize the Donbas as an occupied territory”

Volodymyr Lanovy frankly told journalists about his strategic vision of Ukraine and about how to ride out the crisis
26 April, 2016 - 11:14

During the recent grueling prime-ministerial race, the newspaper Den suggested an alternative Cabinet composition. In particular, our contributors and experts proposed that the office of prime minister be taken by Volodymyr Lanovy, a person who had shown a certain vision and attitude as Minister of Economy in the crucial 1990s. It will be recalled that he was the one who resolutely spoke against an uncontrolled privatization which, after all, begot oligarchy. The latter still remains a noose around the neck of medium business and poses a threat to statehood.

As Den’s editor-in-chief Larysa Ivshyna, who in fact put forward the idea of this material, points out, one of the key goals of this publication was to show: there is a person Ukraine, who has properly assessed the problem. Lanovy’s well-known expression “Ukraine saw a counterrevolution in 1994” explains at what stage we went astray and where we must go to find our path to success. For, as the editor-in-chief comments on this “dislocation” from which Ukraine suffers, “plastic surgery won’t do, we need a ‘bonesetter.’”

Incidentally, Lanovy himself did not get embarrassed over or say no to our initiative to nominate him as premier of an alternative government. On the contrary, on the day our publication came out, he was taking part in Savik Shuster’s talk show, and everybody who saw him noted that it was one of his best appearances in TV programs – he explained in a friendly, convincing and very accurate way the problem itself and the algorithm of its solution. “I’d like to give Premier Hroisman a piece of advice. He says he will be doing reforms, particularly the ones that Yatseniuk launched. I wish he hadn’t said this. We don’t need these reforms. He should have said he would bring this country to a normal condition, when the economy works for people. Secondly, he said he would be fighting corruption. Begin with giving access to certain websites and instructing all agencies to check online who they owe anything to, draw a list of the seized property and of the places where it is being stored, including the State Property Fund. There will be no corruption control unless this is done. This is the default line between the old and the new system, the old and the new elite. Only an information-and-digital economy and cutting-edge technologies will take us out of this crisis,” Lanovy said. Later, at our editorial office, Lanovy “opened the secret.” After we had nominated him as premier, he began to receive calls and letters from the people who were ready to support him. Among them were representatives of a progressive agrarian association that comprises dozens of thousands of small and medium-scale entrepreneurs. This means that there are people in this country, who are ready to rally together and work with those for whom being in power is not a way to self-realize or get rich but the cross they are ready to bear to pay off their debt to the land that begot and gave talent to them.

Notably, we invited Lanovy to the editorial office on the day the newly-appointed Cabinet was in its first session. The Day’s readers can now compare the programs of the actual and the “alternative” prime ministers. We are going to conduct this kind of interviews with our “ministers” further on.

“THE GOVERNMENT SHOULD BE INNOVATION-MINDED”

Alla DUBROVYK-ROKHOVA: “You are the prime minister of Den’s alternative government. What is your program of actions to ride out the crisis? What steps must be taken first of all? What about our strategic lodestars?”

“My vision is that the government should be innovation-minded. Unfortunately, in the 25 years of Ukraine’s independence, practically all the governments have been trying to ‘steer,’ not to create and develop, the economy.

“Systems are working on their own: banks deal with their clients’ accounts, restaurants serve people, boiler rooms heat houses, etc. They don’t need to be managed by a minister. The state should introduce some qualitatively new things that improve and restructure this system, including production, consumption, and capital. And whoever goes to the government should ask the question: ‘What new and useful things can I offer to the state in this extremely difficult time?’ Our current problems will not straighten themselves out by force of inertia, by themselves… We are facing a real danger of losing the economy, resources, and statehood. Everything – the industry, agriculture, education, and research – is falling apart in this country. There are too few resources to keep these afloat, let alone develop them so that they help improve the quality of life.

“The fact that foreigners with managerial pretensions have been invited to Ukraine may create an impression that the nation is unable to bring forth people who can make crucial decisions, take resolute steps, and build the state. Maybe, this is what decision-makers, namely, the president and parliament, really think. But, in reality, we do have his kind of people. Yet the impression is that foreigners in the government, stare-run companies, etc., is a signal to the world that the Ukrainian nation is incapable of offering the world people who will be moving the planet on a par with representatives of other nations. As a nation, we must nominate for governmental offices our own leaders who meet the global standards of quality, can formulate concepts and put forward programs and projects aimed at solving the problems of the entire humankind.

“One more point is the strategy of reforms. We should draw up a plan that will help us develop our best abilities. For we are strong not only in the agrarian sector, as we are told.”

A.D-R.: “Are you so sure because you have calculated that public opinion is evolving faster than the institutes of statehood are degrading? Do we still have time for ‘making mistakes’?”

“The economy is a self-reproducing system. I assure you that if we’d had a government of true managers for even two months, there would be stability now.”

“PUBLIC ADMINISTRATION IN HEALTH CARE SHOULD NOT BOIL DOWN TO THE QUESTION OF WHERE TO PURCHASE MEDICINES”

Vitalii KNIAZHANSKY: “Mikheil Saakashvili says the new government is ‘faceless.’ Maybe, this will allow our economy to ‘get its breath back’?”

“I think it is about ‘people without a position.’ I absolutely share this opinion. Who puts these people forward, in what way, for what purpose? It is very important to answer these questions. There is so much talk now about a crisis of public trust in the authorities, but we do not even have a public debate. Why not gather the relevant associations and organizations and discuss who is to be chosen as minister of information policies, energy, etc.?

“George Bush Jr. chose in the 2000s a Colorado University professor and the Nobel laureate in physics as energy secretary. I stress – from Colorado, not from Vinnytsia or Kyiv. They look for the best, above all, among themselves because they know that if they fail to find such people in their country, the latter will lose much of its appeal. And they pursue a certain selection policy to find the best.”

A.D-R.: “What are your criteria for choosing a person who would be able, as a Cabinet minister, to take this country out of the crisis?”

“Firstly, a critical attitude to reality in the times of both a crisis and high dynamics. Secondly, independence from the financial-political groups that formed the reality we are living in, and the knowledge of what public administration is.

“For example, public administration in health care should not boil down to addressing the problem of where to purchase medicines. It is business that tackles these problems. The public health ministry’s top priority is heath of the nation. Public administration is not direct management of a facility. It would be nonsense for the energy minister to say: I have allotted 50 million hryvnias to buy coal somewhere. What does he mean by ‘allotted’? Nobody will ever work on this country’s market, search for alternative ways, or contribute to progress if one can just wait for a ‘sop’ from the state. The official is supposed to ensure a trouble-free operation of the system and set up a price-formation system that will encourage, not paralyze, the sector.”

“OLIGARCHS SHOULD BE STRIPPED OF PRIVILEGES”

Valentyn TORBA: “You have often defined our economic model as oligarchic capitalism. What kind of a relationship should the government and oligarchs maintain?”

“Our economic slump was caused by old enterprises, uncompetitive products, lack of money and credits, etc. All these factors result from the oligarchic ownership of businesses. There is such thing as private ownership. Private businesses are ‘one’s own’ by definition, when this is always on the owner’s mind, when he thinks of competition, risks his property and material condition of his family, looks forward to the latest achievements, offers innovations, changes something, etc. A normal enterprise strives for equal rights, a fair market regulation, price formation, licensing, etc.

“There is also an oligarchic – quasi-private – form of ownership, when one owns a lot of businesses. Kolomoisky owns a hundred private entities, including a soccer club, the media, metal, oil, etc. He has to deal with all this – otherwise some sector will grind to a halt. For this reason, what helps oligarchs achieve results and profitability is not innovations and competition – on the contrary, they stifle competition and opt for monopoly. Then these 4 or 5 people manage the entire economy. As a result, they influence ministries by giving them instructions. Economic processes depend on the oligarchs’ instructions rather than on markets, producers, or national interests, when ministers would map out strategies and set priorities and goals. By influencing the government, oligarchs receive additional subventions, loans, tax relief, extension on debt repayment, tariffs, etc., thus drawing economic profits and capitals over to their own enterprises. But, instead of investing them in these enterprises, they smuggle them abroad. They have a different type of activity – to grab, by way of privatization or bankruptcy, as cheaply as possible what was made by others, to ‘squeeze it dry’ and take it abroad. Almost all of our oligarchs are foreigners, with their families living abroad.”

V.T.: “Does the fact that all oligarchs are ‘foreigners’ mean that we are approaching a new historical stage, when we will have to build the country from scratch – without them this time?”

“They must first of all understand that if they persist in going against the stream, the whole structure will tumble down on them. All that is connected with the Maidan has already affected their assets.

“Buy it would be wrong to shoot from the hip in the economy, e.g., to undermine the oligarchs’ holdings, nationalize or shut down their businesses, for this will cause damage to the entire state. So the oligarchs should be stripped of their privileges. This means restructuring the macroeconomy and making tariff and price formation a realistic and objective process. This in turn means that it is necessary to revamp the credit system to avoid situations when somebody can receive a $20 billion-worth loan and not repay it. Besides, we need transparent budget, tax, antimonopoly, and privatization procedures.

“Fighting corruption, of which the new prime minister spoke, and achieving macroeconomic stability are associated with changing the place of oligarchs in the system of power and replacing the very system of public administration.”

“THE TAX CODE IS WRITTEN IN THE SOVIET FINANCIAL POLICE STYLE”

V.K.: “Has our progressive public failed to reform this country’s taxation system?”

“I haven’t seen a full-fledged reform program yet. We can still see ‘wolfhound taxmen’ do their job under any circumstances. It makes no difference to them whether an enterprise has paid 22 or 40 percent to the wages fund – they will come and tell it to pay 5 million in the current quarter – otherwise they will impound its accounts and property and establish their own administration.

“In addition, it is wrong to revise the Wages Fund’s taxation system and contributions to the Pension Fund and, at the same time, not to carry out the pension reform and the reform of wages taxation because these things are interconnected. It’s necessary to cut taxes on the wages of individuals and enable them to make high-interest contribution to their own pension accounts. If one earns too little, he or she is told not to pay to the budget but is allowed to place 20 percent onto their own account – in this case people will promptly bring over their wages. Naturally, the state must make sure that this monetary unit and amount of money remain of a certain value, depending on indexation.”

A.D-R.: “But the progressive public worked on this reform. We saw two groups of public experts enter into a public conflict over whose idea is better. What is going on among our experts?”

“I am not invited. There are very many careerists among our young people, who want to reach the top right after getting a degree – so the circle of experts is restricted. I was a Harvard professor, and they gave me this opportunity for a few months. So what? The place where you studied or taught does not mean much.

“Some experts once came to the Maidan’s Civic Council and asked me to campaign for their project of tax reform. I suggested that they themselves launch a campaign that will include open roundtables, where various people – accountants, businessmen, etc. – could speak out and make their contribution. They answered that they had no time and money.”

V.K.: “As for what kind of taxes there should be in Ukraine, do you support the position of Jaresko or of Yuzhanina?”

“Jaresko has no position at all. She does not know about the tax system and its problems. When asked about her position six months before the budget debate, she referred the questioner to her deputy who ‘was in charge of this.’

“I spoke and explained to them that the whole structure of tax relations needs to be changed – taxmen must not come into contact with taxpayers; we need a contactless form of interaction, which will make bribes unnecessary. Taxmen have no right to impound and shut down businesses only because they suspect something. Inspectors and their bosses should be called to account for the damage they do to businesses. Taxpayers should enjoy the presumption of innocence and be free to look for ways to repay a tax, while tax collectors must not punish, seize property, or pronounce somebody bankrupt. Taxmen are supposed to help entrepreneurs work and ride out a crisis – they should in fact become a service, not a supervisory body. Therefore, the entire Tax Code should be revised, for it uses wrong terms – the entire text is written in the Soviet financial police style.”

“THE STRUGGLE BETWEEN OLIGARCHS AND ENTREPRENEURS IS AN OPEN POLITICAL STRUGGLE IN UKRAINE”

A.D-R.: “Your suggestions and approach will help create a class of owners in this country. But they are totally different people – you can’t possibly force them to vote for crowd-pleasing things. I wonder if you can see those who are ready to support you and your positions, to help you. For example, we have volunteers who kept our soldiers well-dressed and well-fed on the front and thus backed Ukraine’s statehood at war. Where are the volunteers who are ready to offer a high-quality alternative to the discredited officials now in power?”

“We should not underestimate the oligarchs who are trying to make sure that we have independent businessmen, competition, and makers of alternative products. Oligarchs are afraid of and don’t want to allow this. For example, they place ‘their own’ ministers of agriculture because they will work for big landowners, not for small-scale farmers.

“The same is occurring in the cities. Banks are being controlled in such a way that there is no money for innovational small-scale business.

“Therefore, the struggle between oligarchs and entrepreneurs is an open political struggle. When Yanukovych came to power, who did he come out against in the very beginning? Against entrepreneurs. This provoked the ‘Tax Maidan’ followed by persecution, impoundment of property at marketplaces, demands to give up retail outlets, etc. In other words, oligarchs feel with their guts that entrepreneurs are their social adversaries who want to live in a different country under fair rules. For this reason, the independent entrepreneurial class will not see a successful revolution unless it becomes aware of its political importance. From the political angle, this struggle is a mechanism to form the middle class. The middle class comprises the sociopolitical groups that do not depend politically on the authorities. Whoever can earn independently and does not depend on the authorities is the basis of a civil society which will not allow being manipulated.”

“WE SHOULD SWITCH FROM COAL TO ALTERNATIVE SOURCES OF ENERGY”

V.T.: “Ukraine has in fact lost the industrial Donbas, i.e., a lot of strategic enterprises as well as access to resources. Have you ever addressed this problem? What have we in fact lost together with the Donbas and can we make up for these losses?”

“This topic has two aspects. One is the economy and the social setup of the occupied territories and the areas in the zone of conflict. The other is relations with Russia.

“Unfortunately, our side is not doing everything to show success. On the contrary, the aggressor’s capital is being increasingly spread and the number of Russian banks is on the rise in this country in wartime. They are buying our businesses and infrastructural facilities. What can justify this?

“We need a real pattern of counteracting not only the aggression, but also the abovementioned economic expansion. This must be done in tough, fair, and easy-to-grasp terms.

“As is known, industrial output on the occupied territory has dropped by 60-70 percent. This catastrophic fall was caused by war, looting, and ruination. The equipment is being taken to Russia, the question of energy supply still remains unclear, there are no markets – these are the signs of the condition the Donbas’ occupied part is in now. Should this go on, there will be a zero economy in the Donbas two or three years later.

“Two processes have combined – physical ruination and moral degradation of industrial facilities on the occupied Donbas territory.

“Coal mining will be gradually phased out as a source of fuel supply. Incidentally, it is forbidden to use coal in modern-day developed countries because it is a hazard to the environment. So we should switch to the alternative sources of energy, such as, above all, the sun, winds, water, the sea, and farming wastes. This is my vision of the Donbas as part of Ukraine. Young people in the Donbas must be given the knowledge of new priorities rather than assault rifles.”

A.D-R: “You have noted that the economy is inclined to self-reproduce. Unlike the economy, the state and statehood do not have this inclination. How much time do we have to launch reforms and not to lose the state?”

“The standards of enterprises will depend on workforce skills. If we still have engineers, we will have industrial facilities. If we only train programmers, we will only have an IT economy which, incidentally, needs no energy basis. We should continue to use traditional, but high-technology, industries.

“There is such thing as objective term of workforce generations – it is 20 years. This means that if people do not work or upgrade skills in their profession for 20 years, they will get disqualified altogether. Should we have no new engineers, we will be only entrusted with, say, grain or seed processing, which is a very automated and conveyorized process that does not always need the workforce.”

“THE DISINTEGRATION OF A MODERN STATE BEGINS WITH THE DESTRUCTION OF SCIENCE”

V.K.: “Do you think the actions of Ukrainian leaders look as if Ukraine does not need science at all?”

“If there is no science, there will be no state. The disintegration of a modern state begins with the destruction of science. Scientists are highly-qualified and extremely intellectual people. Should they fail to realize themselves (and they are striving not just to work but to create), they will leave for other countries which will create normal conditions for them. For example, our mathematicians and, naturally, programmers will be received abroad with pleasure.

“If there is no science, there will be no education. The latter is going through not so good a time now. Take, for instance, the training of medical personnel. As there is almost no medical research now, young people graduate from higher educational institutions as rather mediocre doctors. What kind of services can they offer us? Those who were taught to be a doctor go to the related fields, such as pharmacology. And if medicine and education break down, so is the social setup. Teachers will not be able to hand down the nation’s culture to future generations. And when national culture declines, the nation is no longer able to bring forth its own highly-educated politicians or form the political elite. As a result, it loses competitiveness and is unable to rival the educated nations both in international trade and in the struggle for investments. As a result, the country may even lose its statehood and slide back to the status of an oppressed republic deprived of any rights. We will have the harvested crops taken away and given almost trinkets in exchange.

“Neglecting research and education may lead to this very situation. And we can feel even today that people are not exactly rushing to work in these spheres. Encouraging people to, as they put it, ‘claw their way into books’ should be one of our first and foremost steps. There must be decent salaries not only in the police. If academics begin to be paid generously, young people will properly assess the government’s intention. This will be a very effective signal. And we will be a cultured nation. But, so far, graduated academics are being ousted from the field of knowledge. And where are they to go? To be market vendors? It is no crime at all, of course. But this will mean that we are just squandering the greatest wealth of our nation, which it will be very difficult to restore later.

“I am still convinced that civil society will rise in Ukraine and medium- and small-scale business will become more mature. We will get rid of all those oligarchic offshore deals and cleanse this country.”

By Alla DUBROVYK-ROKHOVA, Valentyn TORBA, Dmytro KRYVTSUN, Vitalii KNIAZHANSKY, The Day. Photo by Artem SLIPACHUK, The Day

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