Recently, Ukraine celebrated the eighth anniversary of its independence. A natural question that arises is what have we thus far achieved regarding the well-being of this country and its citizens? Practically all Ukraine's economic indicators and living standards of most of its population have fallen two to four or more times in this period. The people's faith in the success of innovations has been killed, and there is a real risk of total regression and return to a path already traversed. No one could have predicted such a result even in their worst nightmares.
Let us try to see if it could have been different.
The components of a market economy mechanism are widely known and include privatization, open pricing, stabilization of the national currency, liberalization of foreign economic activity and free trade, commercialization of the banking system, and the development of small and medium business. Let us examine some of these components.
Privatization is a basic indicator of market reform. Private property is really a powerful stimulus that makes people work better and, thus, enhances production. Now, what do we have at the moment? In Ukraine, the share of privatized enterprises is much larger than in most developed countries of the world. Even in Chernihiv oblast, one very conservative concerning any changes and reforms, 84.6% of all enterprises have been privatized, and their share in Chernihiv oblast's industrial output accounts for 90.8% (compare this to the US, where 60% of goods are produced by private companies, and the rest, by state-operated ones). There are no developed countries, where state companies produce less than 20% of total output.
Our privatization has not set the industrial sector working, and the state budget has not received significant replenishment. For one cannot take seriously the corporatization that only resulted in employee-shareholders who have not been getting their wages for months. Of course, they could not possibly feel like owners. The Ukrainian version of joint stock companies basically resembles collective farms, where each member was officially an owner.
No achievements with regard to the liberalization of foreign economic activity can be seen either.
Ukraine has completely given up its domestic market to foreign producers, failing to protect its own through customs and excise duties. We have voluntarily withdrawn from the markets for goods in the CIS and Eastern Europe. The growing technical backwardness and industrial restructuring toward energy and material consuming technologies make our goods noncompetitive on world markets. The lack of effective barriers to capital outflow has resulted in our investing in the economies of the developed countries without any benefit to us. In the attempt to receive high interest loans in hard currency, the Ukrainian government agrees to all the requirements established by the IMF and other financial institutions with regard to state policy and the progress of reforms. Our attempts to actively participate in the organization of international trade have not been effective. Ukraine is being held within economic restraints and sanctions, while the noose of antidumping processes is being tightened more and more.
There is a universally known concept called the level of economic independence . This is the ratio of import volume to gross national product. For instance, in the US this ratio is 9.5%, in Japan, 13.6%, and in Ukraine, over 60%. And this is in terms of non-shadow (legal) economy, according to official statistics. But the larger sector of economy is in the shadow sector, and we know that it is precisely this sector that exports dollars and imports goods, which leads to further decline in the level of economic independence.
Ukraine's economy will not be able to develop intensively unless we can basically stabilize currency, financial and credit system, and if we do not halt inflation. Through the use of monetary and financial policy (including price, tax, and interest rate policies), one can create the conditions for either rapid economic development or the paralysis of industry and the country as the whole. Our young nation, finding itself in a critical condition, has failed to find ways for the real and effective utilization of such factors. However, as for the purely external side of the market scenery and stage props, we have a two-tiered banking system with an extensive network of national and regional commercial banks, a rather stable national currency, the hryvnia, non-interference by the state in the price regulation process, despite the dramatic price disparity, for instance, between industrial and agricultural products, endless revolutionary changes in the tax system, etc. Based on this analysis one can conclude that the main components of a market economy, that distinguish it from a planned and instructive one, have been introduced to some degree in Ukraine. Why have they produced a negative result then?
Reforms have been implemented ignoring or sacrificing the main components and goals of the economic model, both of the market and command- administrative types — GNP size, production volume, product competitiveness, trade balance, labor productivity and, finally, living standards, and social security. In fact, these are the components, especially, the two latter, for which reforms of all sorts and orientations, including the market ones, should be carried out.
We have no state economic policy. Neither do we have a country development strategy or concept. There is something on paper, but all this is not harmonized, presented fuzzily, and official structures do nothing to implement it. Take, for example, tax policy. At all levels, they continuously say that it is aimed at supporting the domestic producers. In reality, as a result of the tax reforms, domestic producers are being suppressed ever more strongly with each passing year. Consequently, most financial and economic processes have been driven in the shadow sector of economy, while its “transparent” sector is semi-paralyzed. Industries barely make ends meet, but the empty state budget demands new revenues, and the last money is squeezed out of enterprises to replenish it. The state of affairs is such that they expect that tax administrations will collect fines accounting for up to 15% of the total state budget.
During the years of independence, there have been six government in Ukraine. Each of them developed and adopted an economic Government Action Program. And none reported on its implementation. We can judge by living standards whether the expected results have been achieved. But what caused failures and defeats, and how the situation can be improved in the future — such questions have never been answered.
Having officially taken the path of market reforms, we are not building a developed society with guaranteed social security and mixed regulated economic model but are sinking into the economy of the state-clannish bribe-oriented capitalism in its most brutal and ghastly form. And the losers are all segments of the population, the entire people of Ukraine.






