Poland and Ukraine, so close and yet so far apart.

Spoilers. In Poland, reforms of the economy were made even during Communist rule. Following the end of Communist rule, ambitions to join the EU and support from the EU and IMF gave further impetus to reform. As one of the earlier reformers, Poland has turned into a growth engine. Not being part of the Soviet Union was a bliss for Poland but being a Soviet republic turned out to be a curse for Ukraine. No reforms were made by its post-Soviet leadership during its first three years of independence.

Opaque liberalisations and privatisations that followed enriched former “Red directors”. During this time the oligarchs emerged. They have since not only dominated large sectors of the Ukrainian economy but also the political arenas. From then on, Ukraine’s people have been robbed and deprived of reasonable standards of living. While the influence from external factors, especially the EU, was beneficial for Poland, Russian influence and armed interventions have prevented Ukraine from growing.

 

The first lines of Dickens’ famous novel, “A Tale of two Cities”; “It was the best of times, it was the worst of times”, capture the developments of the two countries’ economies since their independence well. The Polish developments since it became democratic are truly remarkable given the poor developments under Communist rule. The Ukrainian developments since its independence are also remarkable, but catastrophically so, c.f. Figure 1.

Figure 1. GDP per capita in Poland before and after Communism (top) and compared to Ukraine 1990-2017 (bottom)

Source: Top panel: Maddison Project Database, version 2018. Bolt, Jutta, Robert Inklaar, Herman de Jong and Jan Luiten van Zanden (2018), “Rebasing ‘Maddison’: new income comparisons and the shape of long-run economic development”. Available for download at: https://www.rug.nl/ggdc/historicaldevelopment/maddison/. Bottom panel: “The Next Generation of the Penn World Table” American Economic Review, 105(10), 3150-3182,  available for download at www.ggdc.net/pwt. Note: GDP per capita is real GDP at chained PPPs (in mil 2011 US$). The vertical line in the left panel indicates the end of Communist rule in Poland.

And the Polish development is astonishing also in comparison to other former Eastern European and Soviet republics. From having had the lowest GDP per capita among nine of such countries in 1990, Poland had the second highest GDP per capita in 2017, c.f. Figure 2.

Figure 2. GDP per capita relative USA in 1990 and 2017 (left) and GDP per capita developments 1990-2017 for nine CEE and FSU countries.

Source: “The Next Generation of the Penn World Table” American Economic Review, 105(10), 3150-3182,  Available for download at www.ggdc.net/pwt.  Note: GDP per capita is real GDP at chained PPPs (in mil 2011 US$) and computed relative to US GDP per capita. In the right panel, all series are shown as logs of an index, which equals 1.0 at 2000 so the series start at zero. Since the vertical axis is in log units, the slopes of the series are the rates of growth. An increase of 0.1 is a growth of 100*(exp(0.1)-1).

The recovery of the Polish economy was faster than in any other post-Communist country.[1] Unemployment did however increase sharply in Poland but is now at only 4%.[2] The Ukrainian unemployment rate is around 10%.

 

Initial conditions, speed of reforms and relations with other countries determined the fates of Poland and Ukraine.

 

Why did the two countries develop so differently? Around the years 1989-1991, Ukraine was regarded as having more opportunities to grow than Poland which was then the poorest country in the Eastern bloc. Poland also had foreign debts amounting to 64% of GDP while Ukraine had none. As shown in Piatkowski (2018), Poland had the worst economy of all Communist countries and even defaulted on its foreign debt in 1982.

The World Bank, IMF and EBRD have produced a number of reports with a wealth of analyses and data about developments in those countries. (Some of these analyses are listed below in the “Read more” section).[3] These analyses all point to the importance of the countries’ initial conditions at or before transitions, the pace of reforms during the first yearsof the transitions and the countries’ relations with other countries and regions.

Poland and Ukraine differ markedly in these respects, c.f. Table 1.

Table 1. Initial conditions before transition, reform efforts at the time of transition and relations with other countries and regions.

The different developments of the two countries show that countries that spent a longer time under communism were more likely to see former communist elites remain in power. In these countries the transition process began later under less open political systems, with negative repercussions for the development of market-compatible economic institutions.[4] Also, reforms of judicial and political institutions were absent or delayed because the old nomenclature had lacked incentives to create institutions that were transparent and characterised by rule of law. Under such poor conditions for rule of law, the old elites found ample opportunities to enrich themselves.[5]

That the number of years under communist rule affects people today in terms of freedom and living standards is shown by life in former Soviet republics and eastern European countries previously dominated by the Soviet Union. Life is in general less free and poorer the longer the time spent under communist rule, c.f. Figure 3. 

Figure 3. Years under communist rule vs freedom (left) and years under communist rule vs living standards (right). 

Source: Left panel. Freedom House. http://www.freedomhouse.org Note: Freedom is calculated as the average of Political Rights and Civil Liberties in 2017. High numbers indicate restrictions of freedom. RIght panel. “The Next Generation of the Penn World Table”, American Economic Review, 105(10), 3150-3182. Available for download at http://www.ggdc.net/pwt. Note: GDP per capita for 2017 is real GDP at chained PPPs (in mil 2011 US$).  

 


Initial conditions were more favourable in Poland


Poland became free from Communist rule in 1989, two years before Ukraine became independent from the Soviet Union. In 1989, Poland had the largest private sectors in the Soviet bloc amounting to a quarter of GDP and just a bit below half of total employment (Hartwell (2016), Piatkowski (2018)). Most of the private activity took place in agriculture but also in trade and services. Together with Hungary, Poland undertook a series of pro-market reforms already in the 1980s, before the end of communism. Registration of private firms was allowed, and these were set on equal footing with state-owned enterprises (SOEs). The SOEs were made to react more to changes in demand and supply rather than to directives. Between 1987-1989 the National Bank’s regional branches were cut off and made into commercial banks. Furthermore, inflows of FDI was allowed and many prices were liberalised. Poland also became a member of the IMF and the World Bank in 1986.

On the other hand, not much in that direction happened in Ukraine. Even though Gorbachev introduced some reforms aiming at giving state owned enterprises (SOEs) more flexibility, the economic structure remained largely unchanged. However, some Soviet legislation paved the way for the creation of oligarchs. In 1987, legislation was passed that allowed labour collectives and directors to become independent from the state. In practice they became the owners. Furthermore, the Law on Cooperative Activities of 1988 allowed the formation of cooperatives within the enterprises. The cooperatives engaged in the profitable activities while leaving liabilities with the state. This encouraged asset stripping, which was aggravated by the collapse of state institutions, World Bank (2002).

Poland was also the most open among the communist countries. Polish citizens had been able to travel to the West since the death of Stalin. Over time more and more Poles travelled to other parts of Europe as tourists or seasonal workers or informal traders, i.e. smugglers. And last but far from least, Poland had a strong civil society mostly visible through the independent trade union Solidarity and the Catholic Church, with a Polish pope, which had a prominent role in society.

Ukraine was by and large a closed country with very few contacts with the Western world. Johnsson (2015) shows that even though the civil society before the end of communism was not as strong as in Poland, there had been an underground movement for a long time. [6] However, compared to Poland, the civil society in Ukraine was rather weak and unsuccessful in transforming the country, c.f. Figure 4.

Figure 4. Civil societies in Poland and Ukraine.

Source: V-Dem Institute. Varieties of Democracy database. https://www.v-dem.net/en/.  Note: The Core Civil Society Index aims to measure a of a robust civil society, understood as one that enjoys autonomy from the state and in which citizens freely and actively pursue their political and civic goals, however conceived.

 

The three lines indicate the Orange revolution, the beginning of Yanukovych’s presidency and the Maidan revolution. The independence from Soviet Union witnessed the re-birth of a civil society in Ukraine as mentioned above. Yanukovych fraudulently stealth of the presidential election in 2004 caused the Orange revolution and an increase in the people’s engagement in civil society organisations. The civil society diminished in importance after Yanukovych’s win of the presidential election in 2010. However, the unprecedented criminal behaviour of Yanukovych and his clan during his presidency led to the Maidan revolution in 2013-2014. The civil society in Ukraine has never been stronger and is now more vibrant than in Poland.

The new Polish leadership, supported by its population, pushed immediately for reforms. The old communists in Ukraine maintained the command economy and pursued economic policies that bred an emerging oligarchy.

In Poland, things happened fast once it became free of communism. With the aid of the economists Sachs and Lipton, a newly elected leadership in Poland embarked on the Balcerowicz Plan. The plan contained two types of reforms; macro reforms and structural reforms including institutional changes. The reforms aimed at first to stabilise the macro economy and then provide the necessary conditions for sustained growth. As shown in Figures 1 and 2, the macro measures were effective, and output restored to its pre-Transition level after only two years. The macro policies restrained the hyperinflation and made the zloty convertible at a fixed exchange rate. Fiscal discipline was introduced by prohibiting the Central Bank to finance budget deficits and introducing hard budget constraints for the State-owned enterprises (SOEs). The structural reform policies aimed at opening the economy to trade and competition by liberalising prices, dismantling of monopolies, equal treatment of all property rights, opened markets for new firms and established an Anti-Monopoly Agency. A stock market was established in 1991. Also, the judicial system was reformed, and courts were given full independence.

An astonishing thing about Poland was the strong consensus in the society and across political camps to transform Poland to a country like any other western European countries. Even the Communist party favoured a transition away from the old system to a free and democratic Poland. Piatkowski (2018) provides an excellent account of how the whole Polish society

During its first three years of independence, Ukrainian leadership was fully engaged in state building and sorting out relations with Russia. The old leadership, under president Kravchuk, did not pass any legislation indicating economic reforms. Instead, the old command economy prevailed. Disastrous macroeconomic policies led to hyperinflation and budget deficits. The collapse of the Soviet Union meant that the market for the goods produced by Ukrainian SOEs almost vanished. In order to save the industry and agriculture from going under, the government supplied credits. This resulted of course in massive budget deficits which were financed by the new National Bank.  

An analysis of the benefits of early macro stabilisation is found in IMF (2014). Poland was the fastest country to bring down inflation and restore growth (in 1991). Ukraine was the last country where growth was restored and among the last countries to bring inflation under control, c.f. Figure 5.

Figure 5. Macro stabilisation in early and late reformers.

Source: IMF (2014) p. 13. 

 

And as a result, which I show in Table 1  here, Polish economic, judicial and political institutions are much stronger than Ukraine’s.

The failure to reform not only had a disastrous effect on Ukraine’s macroeconomy. The effects on corruption and rule of law were even worse and explain to a large extent the poor situation of the country today. The old command economy ceased to function, but no markets emerged in its place during the first years of transition. Instead, the state tried to control deliveries between state enterprises and controlled foreign trade. This gradual and ad-hoc approach to transition may have appeared as responding to the Ukrainian’s sceptical view of the alleged “chock-therapies” in Poland and Russia. But the delay of reforms was designed of the old communist elite to maximise rents.

The old elite regulated prices of key raw material and controlled foreign trade. That enabled them to make money on arbitrage between domestic low prices and high world market prices. Licenses and permits for foreign trade were purchasable for high bribes.

Åslund (2015) distinguished between four different rent-seeking methods in Ukraine.

  1. Arbitrage between low domestic prices for raw material and chemicals in Ukraine and high world market prices;
  2. Imports of natural gas from Russia at low prices and reselling at higher domestic prices [7];
  3. Subsidised credits from the State to privileged managers within industry and agriculture [8];
  4. Budget subsidies to industry and the energy sector amounting to 8% of GDP in 1992 and 10% the following year.  

These perverse practices would not have been possible without strong connections between politicians and the oligarchs allowing the former to capture the state. A practice which was enabled since many oligarchs also held political offices or seats in the parliament. [9] The World Bank (2018) describes the model of economic governance in Ukraine as “crony capitalism”:

“Oligarchs dominate large sectors of the Ukrainian economy, extracting rents and exerting their influence on the state through representation in the Parliament. This has allowed oligarchs to tap into rich sources of corruption, including in energy, public procurement, privatization of state assets and tax administration. These governance failures have created an economy largely built around redistribution of rents (excess returns above the normal levels that are generated in competitive markets).”

This has created perverse framework conditions for business which finds it profitable to be politically connected, c.f. Figure 6.

Figure 6. Share of political connected firms in Ukraine 2006-2015.

Source: World Bank (2018). http://documents.worldbank.org/curated/en/125111521811080792/Crony-capitalism-in-Ukraine-impact-on-economic-outcomes 

 

Political connected firms can influence political decisions by offering goods, money, luxury apartments or vacations in exchange for beneficial decisions that favour them. This clientelism leads to inefficient resource allocation and corruption. The World Bank’s analysis found that over the past two decades politically connected firms used various channels to access economic rents. The rents came from public procurement, subsidized loans, transfers from the budget, trade regulations that restrict imports, privileged access to state assets through privatizations, and beneficial tax regimes.

While the fast reforms in Poland also led to decreased corruption and absence of clientelism, the absence of reforms and state capture by the oligarchs has had pervasive effects in Ukraine, c.f. Figure 7.

Figure 7. Corruption and clientelism in Poland and Ukraine 1990-2018.

Source: V-Dem Institute. Varieties of Democracy database. https://www.v-dem.net/en/. Note: Thepolitical corruptio index measures six types of corruption covering different areas which are under political influence on different levels. The index is an average of a i) public sector corruption, ii) executive corruption, iii) legislative corruption and iv) judicial corruption. Clientelistic relationships include the targeted, contingent distribution of resources in exchange for political support.  

 

The absence of clientelism and the low degree of corruption in Poland is explained by the lack of an oligarchy. This is unique for the transition countries. The reason for this is the delayed privatisation in combination with well-functioning asset markets which ensured fair valuations of the assets which were up for sale, (Piatkowski (2018)). A contributing factor was that, during the delay, Poland created other institutions such as rule of law, a free media. This prevented opaque privatisations to, and asset stripping by, a privileged few as in Russia and Ukraine.

The figure above shows some interesting observations for Ukraine. To begin with, it confirms that the Orange revolution in many respects were an anti-climax and disappointing for all who had engaged in it hoping for a less corrupt Ukraine.[10] [11] Clientelism decreased after the Orange revolution. According to Matuszak (2012), this is explained by the competition of oligarchs in Ukraine. During this period, the oligarchs in the east lost influence to oligarchs in the centre of Ukraine. After 2010 when Yanukovych became president, clientelism increased to unprecedented levels. The figure above also shows that the ousting of the corrupt Yanukovych in the beginning of 2014 led to decreased corruption and clientelism.

Yanukovych is quite possibly the worst and most corrupt European politician in modern history, second only to Putin. Åslund (2015), Hartwell (2016) and references therein,  and in the section “Read more” below, provide numerous accounts of how he enriched himself, members of his family and close associates. An overview of his “deeds” can be found here. The World Bank’s Enterprise Surveys show the extent of corruption during Yanukovych and allows for a comparison with the situation before his presidency.

Interactions between private enterprises and the public sector is a good indicator of the state of corruption in a country. In 2009 only eight percent of the Polish enterprises dealing with the public sector were requested to pay a bribe. This can be compared to almost 40% of Ukrainian enterprises a year earlier. Five years later almost no Polish enterprises were asked to pay a bribe, but half of the Ukrainian firms were. During Yanukovych, the situation had turned from bad to worse, c.f. Table 2.

Table 2. Bribery incidents 2008/2009 and 2013 for Polish and Ukrainian enterprises in transactions with the public sector, percent

 Source: World Bank enterprise surveys. www.enterprisesurveys.org Note. Bribery incident is the percentage of firms experiencing at least one bribe payment request in public transactions. The information for Poland is from 2009. 

 

The survey covers more questions which make it possible to get a fuller picture of the extent of corruption during Yanukovych. The survey also allows for comparisons with other countries. During Yanukovych, corruption reached unprecedented levels. Virtually all firms in the 2013 survey (99%) for Ukraine reported that they were expected to bribe officials when bidding for government contracts. While half of the firms that had meetings with tax officials and officials dealing with import licenses were expected to bring gifts, 75% of the firms asking for construction permits were expected to do the same. An interesting observation is also that only four percent of firms in Ukraine regarded the courts as constituting obstacles. The survey also shows that corruption in Poland in 2013 was lower than the average for all countries, c.f. Figure 8.

Figure 8. Corruption in interactions between enterprises and the public sector in all countries, Poland and Ukraine in 2013. (%).

Source: World Bank enterprise surveys. www.enterprisesurveys.org. Note: “All countries” is an average.

The pervasive corruption concerning public procurement was also highlighted in the World Bank’s special focus note on Ukraine in 2014:

“The 2010 Law on Public Procurement was eroded by a series of amendments that expanded the number of exemptions from public procurement law. As a result, only 35 percent of public procurement by value used competitive methods in 2013, undermining value for money and creating oppurtunities for corruption.”

The extent of Yanukovych’s robbery of Ukraine showed up in the macro statistics. An increased budget deficit, unmatched by private savings, led to a current account deficit. And even though the national bank increased its interest rates to defend the fixed exchange rate, Ukraine’s international reserves sank to a level corresponding only two months of imports. Yanukovych also managed to almost double the government gross debt during his years. t’s an open question whose economic policies were the worst, Kravchuk’s or Yanukovych’s.[12]

 

While there was consensus in Poland about joining the EU which spurred reforms, declarations in Ukraine about EU were not followed by serious measures. Russia’s interventions in Ukrainian domestic affairs have been prominent and aimed at preventing reforms and maintaining Ukraine’s dependence on Russia.

 

The ambition to join the EU was shared by organisations and political parties across Poland. Already in 1989, Poland signed an agreement on trade and economic cooperation with the European Communities. This was the first of many steps which finally made Poland a member of the EU in 2004. On its way, Poland had to undertake many reforms of its institutions in order to meet the Copenhagen criteria . These criteria comprise political criteria, economic criteria and administrative and institutional capacity to implement the acquis communitaire The acquis is a full and exhaustive agenda of legal, institutional and economic reforms. By meeting the Copenhagen criteria and incorporating EU laws Poland turned to a democracy, guaranteeing its citizens civil rights and rule of law, with a market economy. [13] 

Ever since the fall of communism in 1989, countries in the west came to Poland’s assistance. In the beginning it was G-7 and the IMF followed by the EU. A 50% debt reduction and provision of a stabilisation fund for the zloty in the beginning of the transition constituted the foundation of Poland’s recovery. The reforms and institution building that were necessary to gain EU membership have kept Poland growing ever since. Over the years, Poland has also benefitted from EU structural funds and is the largest recipient of such. 

Ukraine had from the beginning more frequent contacts with Russia than with any other country. The nature of the contacts was in most cases far from amicable. Already from the beginning there have been problems about gas, trade, and relations to EU and NATO.

The gas trade was a source of conflict between the two countries already from the beginning. Russia reduced the gas supply and/or threatened to cut it off due to Ukraine’s arrears, Hartwell (2016). The gas trade and was used intensively as a political weapon after Putin after took control over Gasprom in 2001. Especially so after the presidential elections in 2004, 2009.

Trade between the former Soviet republics collapsed with the Soviet Union. In the beginning of its independence Ukraine negotiated FTAs with CIS-countries. The FTA with Russia was signed in 1993. However, the agreement did not show up in seamless trade. Both countries have often imposed different types of protectionist measures on each other’s exports. Russia has used both the carrot and the stick as means to tie Ukraine closer to Russia. In 2003, Putin launched the Common Economic Space (CES) which was supposed to be a customs and currency union. Few outside Russia regarded this as a serious alternative to EU. The Russian dominated Eurasian Economic Union (EaEU) has also been a failure, putting it mildly.

Ukraine took the first steps towards a closer relationship with the EU during Kuchma’s presidency and signed a Partnership and Cooperation Agreement which entered into force in 1998. Another important step was the EU Eastern Partnership Program which would pave the way for Deep and Comprehensive Free Trade Agreement (DCFTA) between EU and Ukraine. Ukrainian failure to reform and to meet the Copenhagen Criteria stalled the process.

It was not until 2012 and then surprisingly enough by Yanukovych that things began to develop when Yanukovych and EU representatives initialised the association agreement in Brussels. In August 2013, Yanukovych declared that he would sign the Association agreement. Several laws in this direction were passed by the Rada so that Yanukovych could sign the agreement at the Eastern Partnership Summit in Vilnius later that year. Russia responded by launching at trade war against Ukraine, especially targeting Ukraine’s EU-positive oligarchs. However, instead of signing the Association Agreement, Yanukovych backed out after being pressured by Russia. Instead, he cut a deal with Putin. The deal contained a discount of nearly a third of the price of gas and a Russian purchase of $15 billion worth of Ukrainian Eurobonds

What followed is well known. Yanukovych fled to Russia after having lost support from Berkut which feared an investigation of the massacre on Maidan. After presidential and parliamental elections in 2014, there was a majority in Ukraine for seeking closer relationships with EU. The Association Agreement was ratified in September 2014 and a DCFTA entered into force on 1 January 2016. Putin’s response was a trade war, illegal annexation of Crimea and invasion of Donbas.

Facing the invasion from Russia, the most urgent reform concerned security and defence institutions which were not only corrupt but also infiltrated by the Russians. The Russian war against Ukraine has of course affected the scope for reforms since resources needs to be allocated to defend the country. Nevertheless, several reforms have been planned, launched and undertaken since 2014. Reforming the gas sector was a priority due to reasons described above. Other prioritised sectors were the banking sector, health care, pensions, decentralisation, police and public procurement.  An overarching objective is of course institution building and improving rule of law and fighting corruption. For overviews and assessments of reforms, see here, here and here.

 

Quo vadis Poland and Ukraine?

 

Disappointment of the pace and effects of reforms on especially w.r.t. corruption and rule of law led the Ukrainian voters to elect a new president earlier this year. Following snap parliamentary elections, the president managed to get a majority for his new founded political party. His first trip went to Brussels to in order to strengthen the ties with EU. This and declaration about further reforming Ukraina and fight corruption are positive signs as well as a FTA with Israel.

Question marks have however been raised about proposal of lustration laws targeting previous MPs during 2014-2018. This practice resembles previous battles between oligarchs and politicians. Also, close connections to the oligarch Kolomoyskyi and his entourage casts doubts on the president’s independence.

Dark clouds are covering parts of the Polish sky. The Polish government’s ambitions to reduce the independence of the judiciary and media have raised concerns which for example are expressed here and here , c.f. Figure 9.

Figure 9. Government censorship efforts and attacks on the judiciary in Poland.

Source: V-Dem Institute. Varieties of Democracy database. https://www.v-dem.net/en/. Note: Government censorship efforts refer to direct and indirect government efforts to censor the print or broadcast media. The scale ranges from 0 to 4 where 0 indicate direct and routine efforts to censor the media and 4 rare attempts by officials who are punished if detected. Government attacks on the judiciary refer to government claims that the judiciary is corrupt, incompetent or make politically motivated decisions.

I don’t want to end a post in minor so I’ll add a few positive lines. The current Polish government has received a lot of criticism as mentioned above. It should however be commended for reducing inequality and poverty. Income inequality is lower the the EU average. The government’s increase of the family benefits in 2016 reduced child poverty by a third, from 21% in 2015 to 14% in 2016.

Ukraine’s major advantage it its people which is manifested not only in the strong civil society but also in its young and well-educated workforce. The benefits of this will be larger the more effectively corruption is fought.

Read more

 

De Menil, G. (2003). ”History, Policy and Performance in Two Transition Economies; Poland and Romania.” In: Rodrik, D. (ed). In Search of Prosperity. Analytic Narratives on Economic Growth.. Princeton University Press. Princeton.

Beck, T., & Laeven, L. (2006). “Institution building and Growth in Transition Economies”. Journal of Economic Growth 11(2), 157-86.

Dawisha, K. Putin’s Kleptocracy. Who owns Russia. Simon & Schuster. New York.

EBRD (European Bank for Reconstruction and Development). Transition reports. https://www.ebrd.com/transition-report

Euromaidan Press (2014). Corruption you can’t imagine. http://euromaidanpress.com/2014/07/13/16899/

Fidrmuc, J. (2003). “Economic reform, democracy and growth during post-communist transition.” European Journal of Political Economy. Vol 19, 583-604.

Fischer, S., & Sahay, R. (2000). “The Transition Economies after Ten Years.” IMF Working Paper No. 00/30.

Hartwell, C., A. (2016). Two roads diverge. The Transition Experience of Poland and Ukraine. Cambridge University Press. New York.

Hedenskog, J. & Larsson, R., L. (2007). Russian leverage on the CIS and Baltic countries. Stockholm. FOI. Swedish Defence Research Agency.

Hellman, J., S. (1998). “Winners Take All: The Politics of Partial Reform in Postcommunist Transitions.” World Politics, 50, pp 203-234

Hellman, J., S., Jones, G. & Kaufmann, D. (2000). Seize the State, Seize the Day. An empirical analysis of State Capture and Corruption in Transition

International Monetary Fund (2014). “25 Years of Transition. Post-Communist Europe and IMF.” Regional Economic Issues. Special Report. Washington. DC. https://www.imf.org/~/media/Websites/IMF/imported-flagship-issues/external/pubs/ft/reo/2014/eur/eng/pdf/erei_sr_102414.ashx

Johnssson, P. (2015). Ukraїna i historien. Från äldsta tid till 2015. Carlsson Bokförlag. Stockholm.  

Karatnycky, A. (2005). “Ukraine’s Orange Revolution.” Foreign Affairs, Vol. 84, No. 2, 35-52.

Kuzio, T. (2005). “Russian policy toward Ukraine during Elections” Demokratizatsiya The Journal of Post-Soviet Democratization

Matuszak, S. (2012). The Oligarchic Democracy. The influence of business groups on Ukrainian politics. OSW. Centre for Eastern studies. No. 42. Warsaw.

Piatkowski, M. (2018). Europe’s Growth Champion. Insights from the Economic Rise of Poland. Oxford University Press. Oxford.

Puglisi, R. (2003). “The rise of the Ukrainian oligarchs.” Democratization, Vol.10, No.3, Autumn 2003, pp.99–123

Reuters Investigate (2014). Comrade Capitalism. 5. The Kiev Connection. Putin’s allies channelled billions to oligarch who backed pro-Russian president of Ukraine. https://www.reuters.com/investigates/special-report/russia/#article-5-the-kiev-connection

Reuters Investigate. Comrade Capitalism. The whole series. https://www.reuters.com/investigates/section/comrade-capitalism/

Sachs, J. (1993). Poland’s Jump to the Market Economy. MIT Press. Cambridge.

Vox Ukraine, https://voxukraine.org/en/ contains a wealth of economic and political analyses.

World Bank (1996). World Development Report 1996. From Plan to Market. Oxford University Press. New York. https://openknowledge.worldbank.org/handle/10986/5979

World Bank (2002). Transition. The first ten years. Analysis and Lessons for Eastern Europe and the Former Soviet Union. Washington. DC. http://siteresources.worldbank.org/ECAEXT/Resources/complete.pdf

World Bank (2017). Lessons from Poland, insights from Poland. A sustainable and inclusive transition to high-income status. Washington. https://www.worldbank.org/en/country/poland/publication/lessons-from-poland-insights-for-poland

World Bank. 2018. Crony capitalism in Ukraine: impact on economic outcomes (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/125111521811080792/Crony-capitalism-in-Ukraine-impact-on-economic-outcomes

Åslund, A. (2015). Ukraine. What went wrong and how to fix it. Peterson Institute for International Economics. Washington., DC.

Åslund, A. (2019). Russia’s Crony Capitalism. The Path from Market Economy to Kleptocracy. Yale University Press. New Haven.

Notes

[1] Figure 2 shows development for 1990- but since data is not available for Ukraine and other FSU countries until 1990, 1990 is the starting point in the right panel. 

[2] As shown in Piatkowski (2018), Polish growth has been inclusive contrary to other transition countries. All Polish households’ incomes grew faster that incomes in G-7 countries.

[3] See the section “Read more” for references about developments in Poland and Ukraine. 

[4] The effects on living standards and freedom, compared to the Baltics and other former Eastern Bloc countries that joined the EU are significant which i show here

[5] See Beck & Laeven (2006) for a more elaborated discussion and an empirical analysis of the relationship between years under communist rule and institution building.

[6] In 1987 was the journal Ukrainian News published again after 15 years. And not underground this time. The Ukrainian Helsinki Group re-emerged the same year under a new name, the Ukrainian Helsinki Association. 1987 witnessed a rebirth of the civil society in Ukraine. Some 125 different political organisations were founded between 1987 and 1989. Many of these were later joined together in Ruch which played a major role during the breakup of Ukraine from Soviet Union

[7] State guarantees for imports made it even more profitable. The profits were divided between Russians in Gasprom and the governments. Putin took control of Gasprom in 2000 and claimed a substantial stake in these rents, see Åslund (2019), Dawisha (2014) and the references therein for descriptions of Putin’s involvements in Gasprom.

[8] At an inflation rate exceeding 10 000% in 1992, the interest rate amounted to only 20%.  According to IMF calculations, net credit amounted to 65% in 1992 and 47% in 1993. IMF (2013, 2015)

[9] Matuszak (2012) provides a terrifying account of the emergence of oligarchs and state capture in Ukraine.

[10] Yushchenko, who won the election after the results from the first had been shown to be tampered with to put it mildly. Page three here is quite clear of what went on in election which was deemed as unfair 

[11 Life in Ukraine did at least become freer according to Freedom House which upgraded Ukraine from partly free to free in 2006. However, during Yanukovych many laws and measures were implemented that restricted the freedom of the Ukrainian people and Ukraine was downgraded to partly free again in 2011.

[12] See imf.org for analyses of the Ukrainian economy.  

[13] See Piatkowski (2018) for a detailed account of Poland’s EU accession.

 

 

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