Hands-off Radical De-regulation
Will Ukraine scrap Socialist-style economic remedies?
The hottest ticket in Kyiv these days is for admission to a two-day discussion about the road to recovery for Ukraine’s economy. Sponsors of the annual economic conference, titled “New Economic Outlook,” include some of the country’s most successful businessmen, economists and bankers. Officials from the requisite ministries will also talk about challenges the government faces and how to overcome them.
Macroeconomic analysis of the mess will be provided by Ukraine Economic Outlook, the Kyiv-based macroeconomic analysis and forecasting group near and dear to my heart.
Following Russia’s annexation of Crimea and invasion of eastern Ukraine in 2014, attempts to fix Ukraine’s economy failed, in part because there was no consensus among Ukraine’s benefactors, chiefly the International Monetary Fund, World Bank and U.S government, who offered flawed guidance about which changes were necessary and which were not.
There was no consensus then about what the reforms should be. Just like there is none now.
The battle between social-oriented, socialist economists on the Left and libertarian economists on the Right about economic reforms has been fought in the West for at least a century. In Ukraine, they are still fighting.
Unfortunately, in 2015, Leftist advice was given to fix the economy – that is, proposals from Leftist economists offering socialist-style remedies. Ukrainian entrepreneurs say there should be less government involvement in the economy, the lowest possible taxes and concentrated efforts to stimulate business activity and attract foreign investment by all available means1.
Postwar construction in Ukraine is expected to last forever, so decisions made today are likely to shape what happens long after we’re dead.
As long as the state’s share of GDP hovers around 40%, Ukrainians will remain prisoners of Socialism.
Ukraine’s Economy Remains a Prisoner of Socialism. CapX (February 13, 2017)