Liubomyr Shavaliuk, an economic commentator with a specialization in the financial sector, brings a wealth of theoretical and practical knowledge to his analysis. With experience as an analyst in the stock market, a lecturer at the Kyiv-Mohyla Academy, and a former National Bank of Ukraine staff member, Shavaliuk offers insights grounded in hands-on experience. Notably, he has conducted interviews with numerous bankers and esteemed contemporary economists, including Ernst von Weizsäcker, Jonathan Golub, and Anders Aslund, among others. Currently, Shavaliuk serves on the frontline of the Ukrainian Armed Forces, defending Ukraine against Russian invasion. His multifaceted background lends depth and credibility to his perspectives on economic matters amidst the backdrop of conflict.
Below, The Ukrainian Week presents his insights into the prospects of Ukraine’s victory against Russia, the current obstacles the state and society face, the internal changes Ukraine must undergo, and the goals necessary to achieve victory and long-lasting peace.
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The conclusion of the second year of full-scale war brings Ukraine to a point of profound emotional upheaval unprecedented since independence. Ukrainian society had mixed perceptions of the 2023 counteroffensive, overshadowing previous successes and accomplishments. A slew of negative year-end developments, including delays in Western aid, enemy advancements in acquiring weapons and establishing mass drone production, and significant internal challenges in Ukraine, particularly regarding mobilization, have stretched societal resilience to its limits. For many of us, these times are as challenging as they’ve ever been. And this is understandable. In challenging times, pausing and gaining perspective on the situation is often crucial. We need to reassess it in light of Ukraine’s core values and ensure we’re still aligned with our objectives. In the midst of war, our ultimate goal is Victory. But what does Victory truly entail?
What do we truly mean by ‘Victory’?
It might appear that defining Victory is a straightforward task. Yet, every answer I come across, no matter how many, seems incomplete. To me, Victory embodies a complex idea. Regardless of the specific, tangible aspect we emphasize, it merely scratches the surface of a broader network of elements and connections, many of which remain concealed from ordinary perception.
The primary tangible manifestation of Victory is often perceived as the restoration of control over Ukraine’s territory within the internationally recognized borders of 1991. While this is a noble and just objective, is it truly the ultimate goal we seek? To me, Victory will truly happen only when the Russian enemy leaves Ukraine alone, allowing for lasting peace—unequivocally, definitively. However, what is necessary for the enemy to us alone, in peace? Ukraine must become significantly stronger than Russia. A plethora of arguments can be marshalled to bolster this assertion, elucidating why and how it will be effective. However, delving into these details would divert our focus from the central issue – the concept of Victory. In this context, when we speak of ‘stronger’, we refer to the comprehensive level of Ukraine’s development, encompassing its capacity to tackle multidimensional challenges of the utmost complexity. Hence, it becomes apparent that we are not solely addressing military prowess, for a robust military cannot be sustained indefinitely without a thriving economy, and a productive economy cannot flourish without a proficient society and educated populace.
Weakening Russia
There are two fundamentally different pathways to achieve a scenario where Ukraine surpasses Russia in strength. The first path entails Russia’s weakening to the extent that it becomes less potent than present-day Ukraine. At the outset of 2021, our adversaries’ economy was 7-10 times larger than ours. Hence, this scenario can be broadly described as “while the fat one loses weight, the thin one dies.” The efficacy of sanctions or other measures on the Russian economy is not the crux here. Certainly, with the backing of the entire civilised world, Ukraine inflicts exceptionally painful blows on Russia across various fronts. However, the natural economic dynamics make it unlikely for this path to succeed.
Germany’s GDP per capita decreased by 27% during the First World War and, during the Second World War, by about 60%. In both wars, Germany suffered a devastating defeat. Even if Russia were to undergo similar catastrophic destruction, as Germany did 80 years ago—and given the current economic status quo, this is impossible to accomplish, at least for Ukraine—the hostile Russian neighbour would still be strong enough not to leave us in peace. So, one can take the word of Putin’s footman, Medvedev, who sometimes speaks so bluntly it’s clear he is simply expressing Russia’s true intentions: “The existence of an independent [Ukrainian – ed.] state on historical Russian territories will now be a constant reason for the resumption of military action.” And it will be so if we opt for this scenario.
Ukraine holds such great significance for Russia (statements from the Kremlin consistently reaffirm this) that even as Russia weakens, it may refrain from meddling in other affairs anywhere in the world but will not cease to wage war against us. Since Russia still exerts considerable influence in Israel, the Arab world, and Africa, its capabilities to fight against Ukraine remain substantial. Therefore, such a path not only does not guarantee Victory for us but also, by pursuing it, we are likely to squander resources and lives rather than emerge victorious.
The breakup of Russia
There is frequent speculation about the fragmentation of Russia into several independent states, most of which would lack the motivation to engage in conflict with Ukraine. In this hypothetical scenario, the economy of the neighbouring hostile entity, possibly the Moscow region, would inevitably be weaker compared to Ukraine’s. Many find solace in the idea that this scenario is plausible and would pave the way to victory. However, there are two important nuances to consider.
Firstly, like any thug, a state-bully in this case, Russia knows how to gear up during periods of epochal difficulties. It thrives on the chaos of war. And it is precisely the situation it finds itself in right now. Therefore, I assume that, for a long time, the enemy has not been as united as it is now—this is evidenced by Russia’s coordinated actions in neutralising the impact of sanctions and setting up serial production of drones, among other things. Given such overwhelming unity, Russia’s chances of a rapid internal collapse are extremely low. It would be a mistake to consider them seriously.
Secondly, the dissolution of Russia is currently a nightmare for the West. Our partners fear the uncertainties it brings, particularly concerning the control of nuclear weapons. Additionally, the breakup of Russia would unleash a host of global issues, ranging from mass migration waves of ‘disempowered’ Russian refugees to the potential bolstering of China (and perhaps Iran) at the expense of former Russian territories over the next decade. Our partners are neither mentally nor resourcefully prepared to address these challenges. This is evident. Hence, the West is not yet our ally in facilitating the dissolution of Russia. This reality must be acknowledged.
Therefore, while the idea of Russia’s dissolution may resonate with many of us Ukrainians, given the arguments presented, it remains improbable presently. Certainly, theoretically and practically, Ukraine could eventually foster conditions where Russia’s breakup becomes considerably more likely, even inevitable. However, there is no straightforward path to this objective at present. Given our current circumstances, we lack the capacity to see this scenario through from inception to fruition. Therefore, it’s not prudent to allocate excessive resources to it; doing so might jeopardise our ability to pursue more achievable goals.
Hoping that the breakup of Russia will secure our Victory is merely wishful thinking. This kind of naïveté has plagued independent Ukraine throughout its history; hence, it’s hardly surprising. However, it’s time to move beyond these historical traps. In my view, based on the logic of events, the breakup of Russia will be the consequence, not the cause of our Victory. Therefore, current developments beyond our borders have only an indirect impact on our path to Victory. To achieve it, we don’t need to constantly monitor what’s happening in Moscow; we need to focus on our own tasks to pursue the second path.
The development of Ukraine
The second path involves Ukraine developing to a point where it surpasses present-day Russia in strength. To grasp the magnitude of this undertaking, it’s essential to consider some statistics. In 2021, before the onset of full-scale war, Ukraine lagged behind Russia by a factor of 3,6 in population and 2,7 in GDP per capita. The war widened the first gap by at least one-fifth and the second by one-fourth. Thus, presently, Russia holds an economic advantage roughly 14 times greater than Ukraine. While interpretations may vary, this number effectively illustrates the complexity of the challenge ahead.
And what is Ukraine’s theoretical potential? Let’s indulge in a bit of speculation and envision a future where Ukraine catches up with the United States in terms of economic efficiency. In such a scenario, our GDP per capita could increase by 15 times – this was the productivity gap between the Ukrainian and U.S. economies in 2021. While this wouldn’t immediately make us unequivocally stronger than Russia, it would put us on par with them in terms of economic capacity, enabling us to tackle numerous challenges. The question then becomes: how do we make this happen?
First and foremost, we must collectively understand that just as an individual cannot become fifteen times stronger by relying solely on others, neither can a nation. Throughout 2023, Ukraine harboured the hope that victory would come from the aid of our partners – be it financial, military, or organisational support. This, however, is wishful thinking. While we must express sincere gratitude to the West for their assistance, we must also recognise that true victory can only be achieved through our own unwavering efforts and the utmost dedication of every Ukrainian citizen. Friends and partners are indeed valuable, offering crucial support in challenging times. However, no one can walk the long road to victory for us. Therefore, from a strategic standpoint, we must rely solely on our own capacity for transformation. Without this self-reliance, victory will remain beyond our reach.
Ukraine’s destructive social norms
When discussing the reasons for Ukraine’s failures on the path of state-building and development, many factors are mentioned, starting from corruption, weak institutions, and ending with oligarchs and traitors. All of this is true. But, in my opinion, it all starts with mentality. As the someone once said, a chaos in the minds. The main reason for our national turmoil is post-totalitarian mentality, destructive patterns of thinking and the type of behavior that have grown into a social norm which no one tries to reflect on and change. We do not succeed because we simply do not make decisions (individual, collective, societal) that lead to success. This is a very simple formula.
Here’s an example: In Ukraine, there’s a common belief that nobody trusts anyone, hindering the creation of anything substantial. However, this notion is flawed. The real issue isn’t a lack of trust but rather an excessive and often blind trust in our own circle. This blind loyalty shuts out the possibility of placing trust in those who truly deserve it, in those who are the most competent. This pattern, sometimes referred to as cronyism, is a direct legacy of the Soviet era. In times when any minor transgression could lead to imprisonment, loyalty to one’s own group was essential. However, in today’s world, this mindset stifles any chance of progress. Over the past decade, regions like Donetsk, then Vinnytsia, and now Kryvyi Rih or even smaller districts, have wielded significant influence in Ukraine. Why is this? It’s because the selection of personnel has always been influenced by this Soviet-era pattern.
The consequences are clear. No matter how extensive your network of contacts may be, it’s unlikely to include individuals capable of offering the state the best solutions it requires. It’s crucial to engage with accomplished individuals from across the country, to place trust in them, and to collaborate to chart the best course for national development. Yet, this is often missing. Building a governmental team solely from one’s inner circle is a disservice to the entire nation, driven by the lingering influence of Soviet-era mentality. It’s worth acknowledging that during Poroshenko’s presidency, significant pressure from the West led to the inclusion of capable out-of-circle individuals in state leadership positions, resulting in genuinely remarkable achievements. However, this progress was short-lived and failed to evolve into a sustainable system.
Currently, there is much discourse surrounding the necessity of a unity government in Ukraine. However, I disagree with this because it would be a government of “their own,” but from different parties. This is even worse than what we have now because they won’t find common ground. We need to learn to appoint to top positions people who are effective based on the recommendations of hundreds of professionals, not just for being “one of us” to someone. This imperative extends beyond the present moment and the war context; it’s an ongoing necessity for Ukraine’s development. Achieving this requires shedding the remnants of Soviet-era mentality and embracing trust in individuals who have earned it. It demands humility from each of us. It’s noteworthy that progress towards this goal is evident on the front lines, where people swiftly learn to trust those who demonstrate goodness, regardless of their previous status as strangers. However, this positive trend has yet to permeate the corridors of power, constituting a profound national tragedy.
Regrettably, numerous detrimental social norms are deeply ingrained in the Ukrainian psyche. These norms, just as much as the adversities witnessed on the front lines or in civilian life, hinder our journey towards Victory. To succeed, Ukraine must entrust key state positions to individuals who have transcended the remnants of the Soviet era, freeing their minds from its entanglements. Failing to do so would only result in squandered time and missed opportunities.
Prioritising goals against the norms
Ukrainian governance is currently lacking a fundamental orientation towards constructive goals. To achieve Victory, it’s evident that the Ukrainian state requires individuals who possess the drive to set and accomplish meaningful objectives daily. This ability should be a fundamental requirement for every government official in a leadership role, given our circumstances. Unfortunately, such skills are often absent. Many within the government are primarily focused on adhering to existing laws and following the precedents set by their predecessors rather than actively contributing to the state’s progress. In times where inaction is among the gravest offences against Ukraine, this passive approach stifles development. This phenomenon stems from a destructive social norm inherited from the Soviet era. However, understanding its origins doesn’t diminish its impact. Progress towards Victory is only attainable when we actively move forward, striving to achieve new and positive goals rather than merely going through the motions.
I’ll give a very recent example. In the last few months, Ukrainians have been actively discussing mobilisation, including the additional conscription of 500,000 people into the army. Amidst this context, a troubling trend emerges: numerous reports reveal men of conscription age evading service, opting instead to flee abroad, for example. However, the crux of the issue is glaringly apparent: Ukraine is grappling with mobilisation efforts failing to align it with the primary goal—Victory. Rather than strategic recruitment tailored to specific needs, the current approach resembles indiscriminate herding, akin to cattle at a market. This haphazard method fails to consider the individual’s potential role or contribution to Victory, leading to a myriad of issues—from drafting individuals who may be physically unfit to overlooking the specialised talents of genuinely capable recruits. Therefore, practically starting from the Territorial Centre for Recruiting, we wage war relying on quantity, not quality, whereby based on quantity alone, we are destined to lose. Hence, we conform to outdated military paradigms yet fail to advance towards our ultimate objective: Victory. We opt for tradition over progress. To many civilians, it appears as though they’re being led to their demise. Understandably, Ukrainians oppose this. Though they may struggle to express it, their daily actions serve as a vote against those who shrug off responsibility, flee, and evade.
It’s inconceivable that out of 10 million Ukrainians of conscription age, only 1 million, currently serving and fighting, are patriots of their country. Yet, the majority of Ukrainians simply refuse to partake in what current mobilisation has morphed into—a mere conscription process. To them, it’s evident that such an approach inherently won’t lead to Victory. Why, on a societal scale, do we neglect discussions on the necessity of developing modern troop types, such as those utilising drones? Why aren’t people recruited for such purposes? Even after two years of conflict, why haven’t we managed to produce enough modern drones to flood the Kremlin troops with them? Why does the state lag in comprehending the nature of war and adapting its mobilisation system accordingly? Why, given the resource disparity between us and the enemy, hasn’t human life become the central value guiding all military, economic, and political processes? These questions are rightfully directed at the state by Ukrainians. Yet, the state simply shrugs its shoulders, as a significant portion of officials at all levels are inclined to prioritise norms over goals.
Again, on the front lines, where the goal is to survive and destroy the enemy, no one adheres to the norms; otherwise, it’s an imminent death. That’s why those on the front lines have already rid themselves of mental baggage, and it’s so difficult for them to comprehend what’s happening in the rear. However, for some inexplicable reason, the government administration hesitates to promptly recruit qualified people with firsthand war experience and assign them to key state positions.
The balance of power and reason
Once we learn to choose the goal over the norm at the systemic level, we will immediately see that we have a massive problem with Ukraine’s law enforcement and security structures, which, before the start of full-scale war, were not coping with the majority of adequate goals and were engaged in “power business”. Now, we see that under pressure from the Russian invasion, some law enforcement structures have been cleansed and demonstrated respectable results. However, when viewed as a whole, this institution is evidently overstaffed, and its overall effectiveness is notably deficient.
To address this problem, one crucial aspect must be considered: the worldview of the vast majority of law enforcement officers is not centred on the axis of good versus evil but rather on the axis of executing versus not executing orders (this also applies to individuals in the criminal world). During my service in the army, I learnt it the hard way. Therefore, the effectiveness of the entire law enforcement system depends only on one person – the one who stands at the top and gives orders. If they understand what is good and bad, the law enforcement system will adequately perform its functions. However, if the leader is a person from within the system, completely indoctrinated by it over decades of their career, then the result will be the same as what we’ve had throughout the entire period of Ukraine’s independence.
Once again, there’s a vast resource on the front lines—individuals capable of improving law enforcement structures. In my view, tens of thousands of (former) soldiers, now partially fit due to combat experience, could easily replace idle young policemen in the rear. War veterans understand good and evil intimately, as they’ll never forget what they fought for. Their numbers could rejuvenate law enforcement, ensuring justice isn’t just a hollow term. Yet, this demands political will from leadership—a quality currently absent.
The economy
To tackle the economic challenges that will ultimately determine our ability to surpass Russia in strength, we must navigate numerous sideline obstacles for a significant developmental leap. These problems are nowhere to be found in writing, so dealing with them is not easy. Economics is simpler. The world has long understood, tested, and described in stacks of books what needs to be done for the economy to develop. If we learn to appoint the most effective people who know how to achieve results, and the enforcers do not hinder them, then the rest is just a matter of technique. Because in developed countries, there are hundreds of high-class experts who will run one after another to help us. However, we are far from that yet. How can we explain to the ‘masterminds’ of Ukraine’s current economic policy that the problem of the budget deficit, amounting to almost 30% of GDP, fundamentally cannot be solved by increasing the tax burden on existing businesses? We will close this gap only if we manage to double or triple GDP and more. To achieve this, we need to simply worship each entrepreneur who is currently still doing business in Ukraine instead of intimidating them with brazen law enforcement raids. Sadly, this does not seem to be obvious to the current Ukrainian authorities.
In 2022, Ukrainians held onto hope, but by 2023, disappointment overshadowed their aspirations. To propel towards Victory, 2024 must mark a year of acknowledgement and systematic transition towards actions aligned with a unified strategic goal: surpassing Russia in quality and strength. We must recognise that life will never be the way it used to be; everything will either deteriorate significantly, potentially leading to tragic outcomes or improve drastically. To make Victory happen, every facet of Ukrainian society must exert maximum effort in adopting a new mindset and unconventional and technologically-driven actions, all while maintaining an unwavering focus on the goal: Victory and the People. When we succeed in building a future Ukraine stronger than Russia, the question of returning to 1991 borders will become secondary, as this goal will become so achievable it will be almost irrelevant.
Many Ukrainians are wondering: when will the war end? It will end when Victory happens. To some, this answer may seem commonplace. But the end of the war truly depends on us. To achieve Victory, we need to change things within our society, which we couldn’t change throughout the entire period of independence. First, we change ourselves and then rebuild the country according to these internal changes. Based on our history, it could take decades. However, enlightenment is unpredictable, and millions of Ukrainians have already undergone it during the war. Hence, today, Victory may be closer than perceived.
