20 Years of Balancing: What’s Next?

29 August 2011, 12:30

The model of society and the state that has emerged in Ukraine, better known as the oligarch and lumpen system based on the soviet Russian pattern is far from perfect. It significantly hampers the country’s development and dooms most of its citizens to poverty. To break this vicious circle, the fundamentals of relations between society and the state must change radically.


Despite the fact that the Ukrainian economy was one of the most important elements of the USSR’s economy, while Ukrainians reached top offices in the Soviet Union’s establishment, these apparent benefits emerged as a weakness of the new country. Less than 30% of what was produced in Ukraine went to meet the needs of the consumer market. 95% of output was produced at plants under central soviet control, which were run directly by Moscow. The reforms implemented in the USSR brought extra powers to the directors of enterprises. Meanwhile, they gained no experience of selling their products in a competitive market and continued to enjoy administrative protection. This environment produced a class of “red directors” who could dictate their rules to the country’s leadership and affect key appointments. At the same time, they preserved features typical of soviet directors, such as the lack of strategic thinking and the pursuit of their own personal benefit here and now.

The emergence of red directors and later the oligarchs, though, was not a result of the distorted economy and uncontrolled personal enrichment alone. No less important was the government that had no vision of the goal and mechanisms of transformation. Nor did it take any moves to encourage the public to search for a way out. Thus, the Ukrainian leadership did not opt for early election, which could have created the basis for the consolidation of political parties and at least some formal arrangement of ideas into comprehensive programmes.

It made little sense to expect those in power to take steps they were not inclined to, such as holding an election that could lead to a change of power, or implementing reforms that would undermine opportunities for quick and uncontrolled personal enrichment. There was nobody in the post-soviet Ukraine that could force them to do this. The opposition, in the form that it was in at that time, was unable to offer a realistic transformation action plan, although there were plenty of projects. Nor was it possible to firmly ask those in power for answers. Later, they would say “those were hard times” to justify themselves. Nor could the opposition organize all those who were willing to help, including people capable of thinking systematically and acting consistently, nor could it duly support sporadic protests, such as miners’ strikes or the students’ granite revolution, and use these protests as a basis for pressuring the regime. The opposition proved to be cut off from its social foundation – millions of Ukrainians craving change. Perhaps, a more consistent and capable counter-elite may not have been able to emerge at that time in Ukraine, where the best people were chosen to reinforce the USSR’s establishment, where memories of the Holodomor (forced famine) were still vibrant, and the conscience of the nation – the intelligentsia – was either killed or forced to serve the regime.


From then on, the new structure of Ukrainian society was shaped by sporadic factors leading to the establishment of the oligarch-controlled lumpen model. The leadership ends up being composed of “dominants”, i.e. winners in a war with their own kind, surrounded by groups of retinues. At the bottom – the destitute “mass of people”, forced to work at the enterprises of the dominating oligarchs for a salary that meets their “biological needs” as oligarchs and their friends like to express themselves. The mass of people have no chance whatsoever for ownership, proper reward for their work or opportunities to freely open and develop their own business. Any expectations from the state are in vain. In fact, a special feature of the Russian-Soviet type of the oligarch system is the intergrowth of oligarchs with the state and their interdependence. The mass of people, in turn, can hope for certain handouts. In this case, populism – namely promises, privileges, and anti-market actions such as pressure on business and so on, is the reverse side of the oligarch system helping those in power to gain votes in elections.

Such a system consolidates opportunities to manage the resources of the country and determine its key policies in the hands of a very narrow circle. However, the power in protecting the interests of those at the top reverts into a weakness in both domestic policy and the international arena. The state moves from one crisis to another facilitated by the ruthless exploiting of some industries and markets. Inflation, default and stagnation are frequently used words to denote processes in oligarchies. The showcase impunity of those in power alienates society and undermines the legitimacy of both the government, and the state. At the same time, the rigid administrative system, total corruption and poor image in the world make the country vulnerable to foreign influences. Ukraine has had a plenty of examples, socio-political and economic crises, as well as interference from Russia, whereby it barely escaped the loss of its sovereignty.

Fortunately, unlike the Russian model, Ukraine’s is much more competitive, allowing several centers of influence. It has never depended solely on the resolve of the head of state. Also, Ukrainian society is not made up of the “mass of people” alone. The 2004 Orange Revolution demonstrated the ability of society to protect its rights effectively. But the success of such moves largely depends on the quality of the counter-elite they bring to power. The developments of 2005-2010 proved that the hope to leap over the abyss has not come to pass. The “elite” still has to catch up with society in terms of its progress.


The need for a new elite has been debated from day one of independence. The question is where and how it can emerge. Some hopes are linked to competitive relations within the establishment. But going into opposition is an extreme step that most leading players are incapable of taking, particularly in the current situation. Moreover, what unites current groups in power is no more significant than that which separates them. Competition will be a good foundation for breaking down the governing monolith, but it needs an additional impulse. Given the quality of life in Ukraine, this impulse could come from social protests similar to those that took place in Latin America, Bulgaria or Romania. But Ukraine lacks the forces that could help the organization of such protest. Trade unions are in a pitiful state, while a party that is concerned with the interests of the people simply does not exist. So if any social explosion was to occur, it would only be caused by the government itself, by reducing people to extreme poverty and despair. And even if this should happen, the question remains as to who will be able to replace the current establishment.

Meanwhile, without changing its elite, the country will exhaust its opportunities for development turning into a resource addendum for its neighbours, leading to consequences clearly demonstrated in Belarus. The country needs both “people of action”, capable of specific actions, including protests, protection of rights and resistance to arbitrariness, and “people of thought”, i.e. the intellectual elite, capable of showing the way to changes. The Tax Maidan, student protests and local protests show that Ukraine has the people of action but they are uncoordinated and justifiably do not trust politicians, therefore are not always able to organize interaction and ensure a positive result for their campaigns. However, without a well-thought plan of further action plan risks the recurrence of post-Orange Revolution problems, where the establishment has no critical mass of change-oriented people and the country will once again witness a lost opportunity.

The history of Central European states shows a way that looks natural and acceptable for Ukraine. Modernization in those countries has shown “bourgeois nationalism” in action with representatives of “national” movements, harbingers of change and intellectuals capable of creating a transformation plan, using the middle class as a foundation while the latter was developing and was ready to protect its rights, interests and profits in the manner that intellectuals searched for and found. Without the support of the middle class and small and medium business, no environment, capable of developing an efficient action plan for the country can be created. Neither the state, nor grant foundations will be able to replace national business, since their goals and scope are too different. Meanwhile, without realizing its real interests and opportunities to protect these interests, business will have to play a losing game of “compromise” with oligarchs, which is becoming ever more ruthless. This union has proved efficient for Ukraine’s neighbours and will surely work for Ukraine, unless understanding of this and unification of the business and intellectual worlds does not come too late.

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