Oleh Havrylyshyn

Reforms and Performance under Yushchenko: 2004–09

Were one to characterize Yushchenko’s presidency in a short phrase one could do no worse than Dickens’s classic: ‘It was the best of times and it was the worst of times’. The euphoria of the Orange Revolution’s success in the rerun of the presidential election surely equalled the heady days of November 1989 in Berlin, but unfortunately, the abject failure of fulfilling its many promises created equally strong disappointments, both within the Ukrainian population and foreign observers.

Economic Dependence on Russia

To understand why for nearly twenty-five years after political independence Ukraine continued to be economically dependent on Russia, one must consider not only the imperialist and strategic interests of Russia reflected in the head citation, but, equally importantly, the personal financial interests of individuals within three rent-seeking groups involved in energy trade: Ukrainian oligarchs, Ukrainian Government officials, and Russian oligarchs.

Nature of the Economy before Independence

This section relies heavily on descriptions in four main history books: Subtelny (1988) and (1999), Magosci (1991), (1996) and Plokhy (2015); precise referencing is given only for quotes, or when drawing on other sources.

Reforms and Performance under Kravchuk 1991–94

This chapter will review economic reforms and performance during the Kravchuk presidency and then make some revisionist arguments about the legacy left behind. In particular, it will be suggested that: The immediate and long-term damage done to the economy by inaction on economic policy, hyperinflation and dramatic deterioration of economic potential contributed to the weakening of sovereignty.

Reforms and Performance under Poroshenko. 2014–Present

The victory of the EuroMaidan, with Yanukovich’s flight to Russia in February 2014, once again raised hopes of real change, reminiscent of the days of the Orange Revolution. Two years of governing by the new leaders is of course too short a time frame to render a definitive judgment, particularly since a full presidential election took place only in May 2014, and a new parliament, prime minister and permanent cabinet was not fully in place until December 2014.

The Outcome: Capitalism for the Few and Low Incomes for the Many

The three main aims of this book were to describe what happened with economic reforms and performance, why things evolved as they did and the prospects that the EuroMaidan revolution will succeed. The first two points are summarized in this chapter, while Chap. 15 discusses future prospects.

Main Trends over Twenty-Five Years: Delayed Reforms Lead to Poor Performance

The purpose of this chapter is to describe the long-term evolution of the economy since independence compared to other transition countries. The bottom line is well known to observers of Ukraine: reforms moved quite slowly and the economy performed very poorly, lagging behind most of CEB, and even behind some FSU countries. A thorough description of this past history is a relatively easy task today, with plenty of quantitative and qualitative evidence available after twenty-five years. A much more difficult but perhaps more important task is to explain why Ukraine’s performance lagged so far behind; the answers are sought in the rest of the book. However, this chapter already provides a tentative hypothesis by showing an apparent visual correlation between slow reforms and poor performance. The chapter begins by demonstrating this for the entire post-communist era.

Reforms and Performance under Kuchma 1994–2004

The presidency of Kravchuk was marked particularly by the long delay in economic reforms with many negative consequences. The Kuchma presidency can be characterized as Janus faced: a serious reform effort putting Ukraine into the category of at least a partial capitalist-market economy but paradoxically, also the consolidation of oligarchic power and influence which resulted in a halt to reform progress. True, the reforms were significant (Fig. 3.1) and, unlike in Russia after 1999, were not reversed Success was also evident in financial stabilization bringing monthly inflation down to single digits by 1995 and paving the way to a new currency, the hryvnia, in September 1996.

The Costs of Delaying Economic Reforms

The preceding chapters have already told a self-contained story, in an essentially chronological way, of economic developments in Ukraine since independence. Part III of the book will retell this story from a thematic perspective, analysing five key issues and challenges faced. The challenges are not simply individual stories, but are closely interrelated; indeed, the sequence is itself important. This chapter begins by asking what were the consequences of reforms being delayed for three years until the autumn of 1994.

Reforms and Performance under Yanukovich: 2010–14

The irony of the above citation is striking. Its reasonableness and concordance with the desires of a growing majority of Ukraine’s population contrast starkly with Yanukovich’s increasingly autocratic and kleptocratic behavior. Its apparent forcefulness makes all the more puzzling his decision to reverse course on the EU and refuse to sign the AA a mere three months later. It is common to dismiss the Yanukovich presidency as a kleptocratic regime that eventually fell to the power of massive popular demonstrations. It was that, yes, but the citation hints that the full story is much more complex and interesting. To start with, one must not forget he won the January 2010 election, deemed to be fair and clean, without the fraud of 2004, and he did so with a very clean majority of more than 3%.