How to Rescue Ukraine from Herself

Ukraine has been a tragic setback for American’s democratic aspirations for the region. Over the course of six presidents, with two notable exceptions of the first President Leonid Kravchuk and the current President Volodymyr Zelensky, who was elected just a year ago, those commitments to democracy have not been shared by the Ukrainian people, who found it difficult to elect leaders who recognize the importance of democracy other than as a means to achieve their personal enrichment.

Mr. Zelensky was elected on the platform of combatting government corruption and achieving prosperity. In his inauguration speech, he quoted former U.S. President Ronald Reagan: “Government is not the solution to our problem, government is the problem.” Ironically, his administration has been using “the problem” to solve two critical interwoven issues -- the economy and corruption. Political frivolity rarely goes unpunished. The economy is in the toilet and corruption remains unaddressed.

The existing pseudo-capitalist economy -- a mixture of government-owned and privately owned enterprises -- incorporates two overlapping and contradictory economic organizations that cannot coexist efficiently. The fundamental flaw of the system is that the government as a law enforcer and protector of consumers from the inherent warts and blemishes of capitalism should not be allowed to be part of the same system -- to own and operate for-profit enterprises. In those mutually exclusive capacities, the government is positioned to abuse its power with impunity. Not bound by the concepts of restraints, the government bureaucrats choose winners and losers, engage in embezzlement, solicit bribes, and drive private competitors out of business at will.

In this environment, corruption is an elemental necessity, a precondition for functioning governance. It is the blood of the Ukrainian economy -- the stimulus for government officials and employees to perform their duties.

This immoral economy does not generate enough wealth to cover the expenditures.

To keep the wheels moving, the administration, driven by a quasi-socialist mentality, chooses to create wealth “an old-fashioned way” -- keeping on borrowing with total disregard to the implications of the growing indebtedness. The search for loans and economic aid put forward as the key to salvation is elevated to a national purpose. In the process, an enormous effort and political capital are spent on what may prove to be an exercise in futility.

The United States plays a major role in the IMF, the World Bank, and influences the European Bank for Reconstruction and Development (EBRD). President Trump made his position abundantly clear – no money to a corrupt country. It is not just a matter of decorum; it reflected Trump’s moral convictions that a conventional approach providing foreign aid and project financing directly to the governments that are in many instances unstable and corrupt doesn’t just fail to produce expected results but actually exports corruption. Ukraine is a case in point.

Since 2014, Ukraine has received from various sources more than $22.4 billion in loans, economic, and military aid. Most, if not all, of this enormous financial assistance was simply stolen by the commercial, military, and political elites. Ukraine must stop stepping on the same rake. It needs a fundamental revision of concepts of economy and corruption.

The economic solution lies with the greatest wealth generation machine ever invented -- free-market capitalism. The caveat is that Ukraine is a hybrid of contending aspirations and a multiplicity of conflicting interests. Any significant change requires a thoughtful approach and time to develop the environment for political consensus and peaceful compromise. It should not be rushed by IMF and EBRD bureaucrats, who see the world through the prism of western society, to rendezvous with turmoil.  

Government corruption, on the other hand, can be easily contained per the anti-corruption strategy outlined in “Ukraine: Curbing Corruption.” That is where the immediate emphases should be made. The proposed arrangements have earned high marks from the business community, the media, and were endorsed by Leonid Kravchuk the first President of Ukraine. One of the leading Ukrainian publications characterized it as follow: 

“The author offers an ingenious in its simplicity plan to curb corruption, which is suitable, in fact, in any country in the world.”

The implementation of the proposed anti-corruption strategy would satisfy Trump’s immediate demands and open a door to the negotiation of terms of economic assistance. Economic assistance should serve as the scaffolding for the transition to sustained economic growth. Curbing corruption and unleashing the power of private enterprise will turn the economy of mass corruption into the economy of mass prosperity.

In short, “Government is not the solution to our problem, government is the problem.”