Tuesday, January 28
Укр Eng
Log In Register
PoliticsNeighboursEconomicsSocietyCultureHistoryScienceOpinionsArchivePhoto Gallery
19 December, 2019  ▪  Oleksandr Kramar

Guarantor, referee and coach

Why is the role of the nation-state in the development of the economy only increasing nowadays?

Despite the fact that at the turn of the XX-XXI centuries globalist and ultra-liberal illusions reached the peak of their popularity in the world and widespread in Ukraine, the magnitude of the challenges they posed to the economy of the world and the vast majority of countries forced them to return to common sense. The fictitious “benefits” of unlimited free markets and globalization under ideal, laboratory conditions turned out to be devastating in the world of inequality and restrictions. The gap between prosperous and poor countries is widening, providing competitive advantages not to those who have relied on transparency and hope for “the invisible hand of the market” but to those who have pursued a purposeful policy of protecting and developing the national economy. In other words, the real experience of the last few decades has inflicted a crushing defeat on those who decided to call into question the strong nation-state range of tools in economic success.

Even in the most liberal societies with long-standing traditions of limited intervention of the state in their lives, there is growing discontent nowadays with its weak role in regulating socio-economic processes. The state as a “night watchman” no longer satisfies anyone. Because performing this role it does not allow to effectively meet the challenges of today. It is recognized that the nation-state, along with the national elite, is a key factor and a necessary element of success and safety in today’s world. It protects national interests in foreign markets, balances the socio-economic interests of different social strata and limits the appetite of those performers who try to put their interests above the national ones within the country.

Balanced state regulation of key industries in the modern world is a prerequisite for protecting national businesses and developing the economy, creating favorable conditions for carrying out private business initiative while preventing abuse by individual performers when their actions conflict with the interests of the country.

Ukrainiangiraffes”

Against the backdrop of the world plunging into trade wars, the growing trend toward boosting protectionism and other increasingly vivid manifestations of economic nationalism policy, the key question arises before the Ukrainian political elites: how soon will they realize that the paradigm of minimizing the role of the state in the economic development of the country has completely run its course?

How much longer does the country have to spend in the spiral of degradation and the vulnerability of the Ukrainian economy to the outside world to realize the need for a change in state economic policy? When will the realization that no one is going to give a place under the sun to Ukraine come? You need to take active action at the state level to win it. Or to put up with the inevitable decline of the country and its loss of both economic and demographic perspective. It will then become a donor for the selective use of its natural and human resources by other countries, depending on their needs.

RELATED ARTICLE: The new multivectoral economy

Ukraine in recent decades has been a vivid illustration of the subordination of the national economy to the interests of other countries. Instead of nurturing and protecting our production in high-yielding and highly dynamic sectors that could deliver rapid economic growth, we have allowed others to make money here over the decades. And political evolution has so far been evidence of moving away rather than of the approaching of national political elites to the understanding of the ways and the willingness to break the circle of degradation.

And the first six months of the new government's activities confirmed the fears of The Ukrainian Week that “pigs in a poke”, which as a result of an unprecedented in the history of Ukraine advertising campaign were sold this year to a record share of Ukrainian voters, have also no systematic vision of solving the problems facing the country. Their purpose is only to hold key positions in the existing proprietary oligarchic model of economic development, aimed at parasitizing existing national wealth, its gradual exhaustion and consumption of goods produced abroad or located there.

The old approach of non-critical, non-systematic and fragmentary transfer of external clichés to the Ukrainian lay of the land should be replaced with the policy of economic sovereignty: preserving full freedom of action in determining economic policy, taking into account exclusively national interests.

The history of both the XX century and the previous centuries of capitalist development testifies that without a policy of economic nationalism, poor and underdeveloped states have never become developed and prosperous. It is simply impossible to improve their economic and political level and quality of life without creating mechanisms to protect and stimulate the economy, which would undermine the artificial advantages of countries with more advanced economies or some of its high-yielding sectors. Otherwise, the economy will always be just a subordinate application with outside selected industries.

Incubator

The nation-state has always played a key role in implementing the policy of economic nationalism, creating a competitive national business, channeling the entrepreneurial energy of as many citizens as possible for society to prosper via increasing the overall national wealth.

Under specific Ukrainian post-colonial conditions, the state must also play a leading role in ending economic decolonization and preventing the country from entering new forms of colonial dependence. After all, if a nation-state is weak, then the main centers of gravity are external centers of influence, which begin to be targeted as referee of different entrepreneurial groups, entire social classes or other individual social groups.

A key function of a nation-state is to protect the interests of national business, both domestically and globally. Its task is to prevent the domination of foreign economic agents in the domestic market, to regulate the level and scope of their access and presence in certain segments in accordance with national interests. So that it does not harm, but complements and promotes development of the national business.

Most countries in the world import today either what they cannot manufacture or produce on their own (critical imports), or what they produce much more expensively than traditional suppliers. Instead, in Ukraine, a significant proportion of imported goods are those that it could well produce on its own with quality and prices comparable to foreign counterparts. If in 2005 imported products from other countries accounted for 29.5% of all sales in the Ukrainian trading network (non-food 42.4%), in 2018, their share has already reached 58% (non-food 64.7%).

At the same time, there is an interesting tendency to reduce the so-called critical imports – energy and raw materials – and the costs of importing machines and equipment that we cannot currently produce but that are needed to modernize the economy. Instead, simple consumer goods manufactured abroad, the production of which could easily be mastered by the domestic production not only of large, but also small and medium-sized businesses, are steadily strengthening their position in the domestic market. Therefore, the approach to trade cooperation with different partners should be revised and first and foremost the national interest should be taken into consideration. Access of foreign suppliers to our national domestic market should be accompanied by mutual access to their own markets for Ukrainian finished goods and at the same time not pose a threat to the existence of a particular Ukrainian branch of the economy. The focus should be placed on developing our own production and domestic market.

At the same time, the policy of fostering national business should not be transformed to prevent it from competition, to create overprotection for it. It should only become an incubator designed to grow a large and powerful national business in the face of the most severe domestic competition among as many players as possible. From the outset, all participants in this process should focus on entering global markets and aggressive foreign economic expansion.

Modernizer

Similarly, the function of the nation-state is to ensure the economic subjectivity of Ukraine in the world economy, to support the expansion of national champions - powerful domestic companies, representing both private and public sectors. The task of the nation-state in this direction is to prevent the reservation of unpromising specialization for Ukraine as a result of the global distribution of labor and added-value chains. In particular, due to the determination of growth points and the proper development of infrastructure for dynamic growth, where exclusively within the “invisible hand of the market” it would not develop due to the long payback or the need to concentrate large resources.

In the conditions of weakness of the national economy and business, it is the nation state that should provide the modernization trend and innovative programming in economic development. As it is more difficult to press other countries in those segments where the market has long been divided and leaders have already established themselves, it is more important in innovative high-value manufacturing to sustain national businesses, to navigate and grow with the emerging market niches.

A key role in the economic policy of a nation-state is played by the proper use of the banking and financial sector as a tool to stimulate national business, dynamically increase its production and export of goods and services. The banking system must, above all, motivate citizens and businesses to increase their national wealth, to use it for development, not for consumption. Only in such circumstances can one expect the rapid economic progress of the country. Not only the prospect of economic development but also the ability to pursue an independent economic policy in the national interest depends on having a strong national banking system capable of performing such tasks.

Another task of the nation-state is not to allow the foreign credit resources to be channeled mainly to the consumption of imported goods or services. Except when it comes to raw materials or up-to-date technologies and equipment that are not available in the country but needed for modernization. In the case of foreign control of the banking system or debt dependence on foreign creditors, such opportunities are nullified.

A very important area of state regulation is the creation of conditions for reformatting the country's transport system from post-colonial to the nationally oriented one. The situation is unacceptable when the country’s transport communications system is developing in a colonial type, with the priority of several powerful cross-border, transit corridors with the synchronous decline of the weak enough national network of transport communication. We should definitely avoid situations when it is easier and more convenient to travel from different parts of an allegedly single country abroad and export or import goods than to do the same from its particular districts to centers or transport hubs.

The nation-state must also act as an effective and authoritative referee among different social classes in the interest of maintaining social stability and increasing the overall national wealth. After all, sustainable development and social stability require that the wealth and the prosperity of society members be perceived in it as just consequence of realizing one's potential, and therefore be respected. And poverty would prove solely to be a result of laziness or person’s conscious reluctance to work and develop. Therefore, it is necessary to prevent the preservation of the restricted economy in general or in some of its spheres when one or another “privileged circle” has the opportunity to take possession of corruption or natural rent, thus slowing down the development of the country.

RELATED ARTICLE: Break out of the vicious circle

The establishment of a cult of productive labor and entrepreneurship must be accompanied by the assurance of real supremacy of law, the guarantee of property rights, the suppression of pressure from security forces, and the provision of quality public services. And the increase in public expenditures for this requires a dramatic increase in the responsibility for non-payment of taxes and fees, the impossibility of long running a formally unprofitable business, and the simplification of bankruptcy proceedings.

It is also important to prevent individual markets from monopolizing and industrial distortions. After all, this poses a threat to the decline of certain sectors of the economy in the interests of others. The rent from the use of national natural resources - land, minerals or other national resources - should be fully available to the state, and the state should distribute it to the public interests. In particular, to protect people who cannot (but not those who are unwilling) to take care of themselves from extreme poverty.

 

Follow us at @OfficeWeek on Twitter and The Ukrainian Week on Facebook


Related publications:

Copyright © Ukrainian Week LLC. All rights reserved.
Reprint or other commercial use of the site materials is allowed only with the editorial board permission.
Legal disclaimer Accessibility Privacy policy Terms of use Contact us