ANALYSIS: Kuchma and the "Ukraine 2010" program: remnants of Soviet-era planning policy (03/28/99)

ANALYSIS

Kuchma and the "Ukraine 2010" program: remnants of Soviet-era planning policy

by Volodymyr Zviglyanich

Since Stalin's crackdown on the peasantry in 1929, known as the "epoch of the great turn" - i.e., the abolition of individual farms and the introduction of collective farms, or kolhospy - Soviet life was arranged according to so-called five-year plans, or "piatyrichky." The philosophical background of such algorithms of social life stems from the ideas of Karl Marx about the organization of agricultural activity according to the way English manufacturers - the only existing industrial enterprises in the mid-19th century - functioned.

Marx considered the peasants a class inimical to the messianic role of the "proletariat," which was connected with the abolition of private property (including land ownership) and establishment of "transparency" in the sphere of social relations similar to the patterns of organization in industrial operations.

In Soviet times this idea was modified in accordance with the five-year term between party congresses, as foreseen by the statutes of the Communist Party. Congresses usually reviewed the accomplishments of the previous five-year plan and gave the guidelines for the next five years. These plans were arranged along the lines highlighted by Marx, i.e., they were transparent, all-embracing, and industry- (rather than human-) oriented.

Not a single plan was ever accomplished, and dozens of millions of people were slaughtered for the sake of societal manipulation.

Historical background

After the break-up of the Soviet Union, Ukraine never had a step-by-step program oriented to provide the prerequisites of a market economy. In 1992 it blindly followed Russia's distorted and one-sided attempt at "shock therapy," which was aimed at price liberalization. The move pumped the population's savings into the pockets of the "new Ukrainians" practically overnight.

Sweeping hyperinflation and growing popular discontent with Leonid Kravchuk's chaotic economic maneuvers brought Leonid Kuchma to power with his 1994 "radical reformist program." It was based, however, on the methodology of previous Soviet planning: introduction of societal changes from above by increasing the role of the state in market transformations.

The results of this methodology (despite some sober ideas in the 1994 plan) were devastating: collapse of the national economy; a 2.4 times decrease of the GDP; 1.1 times devaluation of the hryvnia since its introduction in 1996; privatization - nicknamed "grabification" - which never led to the creation of a viable stock market; and huge wage arrears, reaching some 8 billion hrv ($2.5-3 billion U.S.).

The 1994 "radical" plan failed to reach its major goal: creation of a socially oriented market economy designed to satisfy the material and spiritual needs of the people (a slightly modified definition of the communist goal of party programs).

Now, during this election year, the administration felt obliged to propose to the population another long-term program to take effect as soon as the term of the initial 1994 plan expired in 1999. That's how the idea of the "Ukraine 2010" program emerged.

Program's major features

In a three-hour speech at an economic-scientific conference in Kyiv on March 4 (Uryadovyi Kurier, March 10), President Kuchma highlighted several priorities of this new social endeavor.

1) There are three stages to this program: economic stabilization in 1999-2000; acceleration of economic dynamics in 2001-2005, when the GDP will increase by 6 to 7 percent annually; joining the ranks of technologically advanced countries of the world in 2006-2010, when the GDP will grow 8 percent per annum. How such transformations will occur is not disclosed, however. It is supposed that after expected slide of the GDP some 1.5 percent in 2000, it will somehow increase 6 percent in 2001.

2) One possible source of such transformations is indicated: the development of "scientific and technological innovations." This general outline of development for the next 12 years is aimed at increasing the level of economic competitiveness of Ukrainian goods and creating a viable internal market. Scientific innovations will be developed in such "priority branches" as agriculture, food processing, light industry, construction and services.

3) All these developments will be done within a "Ukrainian" model of economic growth, based on promotion of market relations and increasing the role of the state in this process.

4) The state will support the real economy, first and foremost, as well as all existing types of property: state, mixed and private.

5) In agriculture, the state will support emerging farms, as well as kolhospy.

6) The state will protect national producers without resorting to isolationism.

7) The state will radically increase wages and create a strong national market.

Analysis of the program

The proposed program "Ukraine 2010" contains several positive aspects. Among them are: a condemnation of totalitarianism and administrative development of the economy as detrimental to the people; an understanding of the necessity of popular support for economic reforms; an understanding of the gradual nature of economic transformations for countries where the elements of the free market were totally eradicated; an emphasis on the urgent necessity of overhauling the pension system and introducing minimum hourly wages regulated by the state.

Meanwhile, the proposed program also contains major methodological flaws. Among the principal ones is the traditional Soviet enchantment with global projects and "round dates." Mikhail Gorbachev promised that by the year 2000 every Soviet family would live in separate apartment; earlier, Leonid Brezhnev had promised in the "Food Program" adopted in 1980, that by the year 1990 food shortages in the USSR would disappear.

In the same fashion, President Kuchma's "Ukraine 2010" program promises to put Ukraine into the ranks of advanced market democracies, say, France or Germany, within 10 years' time.

The program reveals a lack of understanding of the basic principles of a market economy's emergence (versus creation of a "socialist" one). The first emerged as a natural, though societal, process. There were no theories of "building" markets in the 17th century; they appeared later, in the 18th-19th centuries. The "socialist" economy was created in theory by Marx and then thrust upon society, thus interrupting its natural evolution.

Likewise, the Kuchma program fancies "creation" of a market economy in Ukraine via imposition of a priori formulated measures onto society. This is the same methodology used to build the "socialist" economy; only the label is different. Instead of creating a set of culturally designated conditions for natural emergence (or revival) of market instincts, the "Ukraine 2010" program proposes increasing state mechanisms in all aspects of life.

Another drawback of the program is connected to its hypertrophied expectations. How and why will the GDP will increase from 0 (or a negative number) to 6-8 percent? Who will give money for the development of technological innovations? Who will buy Ukrainian hi-tech products in 2005-2010; who knows which products will be in demand; and why Ukraine is supposed to conquer the world with hi-tech products, rather than with things for everyday use?

President Kuchma concluded his speech with a claim that the economy will be separated from politics. However, an attentive analysis of his speech and the "Ukraine 2010" program gives one the impression that there remains a lot of work to be done in that direction.

Volodymyr Zviglyanich is an adjunct professor of East European area studies at George Washington University and a senior fellow at the Jamestown Foundation.

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