Oleksandr PASKHAVER: “The market will strictly teach us discipline and to obey the law”
Civil society, law, morals — are these economic categories? Is economic efficiency dependent on the types of political ideologies dominant in a society? What does an ideal model of Ukrainian capitalism look like? All these issues have been covered in an interview with an expert who knows Ukraine’s economic reforms from the inside. Oleksandr PASKHAVER is President of the Center For Market Reforms in Ukraine, was independent adviser to the president on issues of economic policy in 1994- 2000, and has been an expert for the State Property Fund since 1991 on privatization procedures.
Recently in Ukraine polemics have gotten more heated over the problem of a civil society in Ukraine. In your view, what role does civil society play in economic development? Could you specify how to overcome the social passivity in our country?
The basis of a civil society, so to speak, its pivot, is the citizen. Defining a civil society as the sum total of non-governmental organizations would be incomplete and even wrong. We can have a host of formal associations but if Ukrainian citizens do not master certain civil features it will be impossible to build a civil society. We must think above all about how to transform Ukrainians into citizens, not what organizations to set up. A citizens is a person who uses his rights responsibly and actively. Aware of their social role, such persons use their potential and connections to protect their rights and those of others. If the number of such citizens is large enough, a civil society can be created. If, however, there is a lack of such persons, we are left with the only option of stimulating growth of a civil society by setting up non- governmental organizations. It is like smiling in front of the mirror: one is in a bad mood but forces himself to smile and the reflection of this smile raises his spirits. Where can we get citizens? We need a period of freedom for such persons to become a mainstream political force. This process is already underway and I think that in several decades a civil society will be formed.
Do you think this process can be accelerated in Ukraine?
The process can be speeded up through education. In this sense, I support education not being ideologically neutral. In the West, it sounds bad to talk about the ideological components of education although they quite actively promote what they call liberal democratic systems of values. On our part, we should inculcate in our children the system of values typical of civil society. In this sense, education should be ideologically active and concentrated. It should be based on the fundamental principles common to the whole democratic world. For example, we must foster intolerance toward violations of human rights. When we say that human rights are inseparable from people we state an analogy to a religious dogma because the word inseparable is a bashful synonym of the word sacred. It follows that these rights cannot be changed, curtailed, or taken away by anybody, by no democratic institution in any democratic way. Moreover, even the whole people cannot deprive an individual of his rights. This is what is meant by the word sacred. These feelings should be fostered since childhood, they cannot emerge in a rational way.
Concerning institutions, there are basic things, which are not done here in Ukraine and which serve as a major brake for the emergence of civic institutions. I mean the laws on self-sufficient funding of the structures of a civil society: various non-governmental organizations. Until such laws are enacted all our civil organizations will be like kept women. In this capacity they cannot simply carry any weight in society. It seems to me that there are four versions of the law on nonprofit organizations, but for a whole decade nothing has been done to pass any of them. This is a good indicator of the immaturity of our elite. Only the enactment of such a law can help create a full- fledged civil society, which would encompass not only protest groups but the whole panoply of human interests.
Your impact on the course of reform in Ukraine has been quite noticeable in the last decade. It is common knowledge that the process sometimes was accompanied by pressure from international financial organizations. The recent economic collapse in Argentina has been directly attributed by some observers to the negative consequences of IMF interference. What is your vision of the recommendations of international financial organizations?
Any recommendations can misfire if treated dogmatically. Of course, there is a lot of diehard red-tape in international organizations, but what stops us from using the recommendations of international organizations flexibly? Let’s take a typical example of privatization where the international recommendations, legal framework, and real practice are quite different. Many of the complaints about domestic privatization coming from Ukrainians and international experts are quite justifiable, and we are rightly referred to successful privatization models in Eastern Europe: the Hungarian, Polish, and Estonian. However, society there was mature enough to produce an effective demand for a market economy. The privatization in these countries came in the wake of free market reforms taking place in a natural market environment. Given such conditions, it was more effective and fair.
Conversely, our formal, unfair, and vulgar privatization was such because it played a role absolutely different from what it did in the countries mentioned. Faced with the lack of a sweeping demand for market reforms, Ukrainian privatization was a generator of market reforms, not their natural result. Begun in a non-market environment, it could not have been anything but formal, something which explains why it was ineffective from the start. As of 2000, however, the positives of the privatization have become apparent.
Could we have delayed? But beginning with Gorbachev’s reforms, privatization was already in full swing, with the red directors laying their hands on assets and profits. The privatization laws of 1991 put an end to this, making the process more transparent and fair.
A mature civil society exists primarily in the countries with established Social Democratic and Liberal ideas. What, in your opinion, unites or divides the Democrats and Liberals?
Speaking about the economic aspect, it seems to me that until the late fifties the Social Democrats adopted positions close to the Communist concepts of state property and active redistribution of public wealth in favor of the underprivileged, etc. But soon centrist approaches began more and more to dominate. The richer Europe became, the less popular the ideas of radical egalitarianism were. In my view, today’s Social Democrats differ from Liberal Democrats in that the former put a greater emphasis on adapting the population to free market reforms. Meanwhile, the Liberals continue to unquestionably consider these ideas as right and do not opt for an active dialogue with the people. I believe, the successes of the Social Democrats have been caused by correlating the rate of change with the ability of the people to adapt themselves to such change. Any pragmatic Ukrainian politician will be forced in the next ten years to operate within this narrow band, implementing liberal economic reforms wrapped up in a tough social casing. There is simply no other way for Ukraine.
The Social Democrats have a firm standing in most of European countries, spreading significantly in Northern European countries with strong Puritan ethical traditions where people are extremely law-abiding, including in the financial realm. What role does a moral code have in creating an efficient economy? Does Ukrainian society need to change its moral and psychological climate if it wants economic progress?
We are witness to quite successful capitalism made in various cultures and very different moral environments. Undeniably, there are many similarities among the countries of the Christian world, but capitalism is doing equally well in the Far East where the ideas of the Buddha and Confucius predominate. National cultures pose no threat to the development of capitalism, reproducing it in national forms. Although the cultural differences between Northern and Southern Europe are very great, Italy and France are no less developed than Sweden. Obviously, Puritanism and total respect for the law promote greater wealth but in other cultural environments the gains have been as impressive. Apparently, sacrificing one’s culture is too high a price to become rich. No one will propose such an agenda to one’s people, let alone the people itself. It follows that we will build our own brand of capitalism, a Ukrainian one. Accordingly, the existing universal economic institutions must be adapted to our cultural environment. This is why I maintain that, while essentially the same, the French, Swedish, or Italian varieties of capitalism differ greatly in their external manifestations. Ukrainian society is building its own form of capitalism. My awareness of this historic mission was a major reason why I supported the sovereignty of Ukraine in 1989. If economic relations in a given country are based on a foreign culture, it will give rise to a money-losing and noncompetitive economy.
But all this does not deny the respect for the law and demands of morality.
Unfortunately, our history has accustomed us to solve many of our problems outside the law. And here we will have to learn. Market realities will strictly teach us discipline and to obey the law, and this is precisely why a substantial segment of the population feels so negative about the changes that have taken place. Of course, our living standards have worsened in real terms, but I think that when somebody says that life is worse he often means that he must now work more and with greater responsibility and discipline to maintain his former standard of living.
