The book provides a comprehensive and well-structured description of reforms in Ukraine from 1990 until 1999. The editors achieved the right balance of Western advisors and Ukrainian scholars and policymakers. Although the quality of contributions varies, the book provides a very good and empirically rich picture of economic reforms in Ukraine.
The structure of the book is logical – the authors cover consequently such issues as strategy of reform, macroeconomic stabilization, fiscal policy, structural reform, privatization and the legal system as well as social policy. The reader may get a sense of how real policy decisions were made. For example, the section on strategy of reform is covered by Roman Shpek, who served at different periods of time as chairman of the National Agency of Ukraine for Reconstruction and Development, deputy prime minister for economic affairs and minister of economy; the issues of privatization are discussed in length by Yuri Yekhanurov, who served as chairman of the State Property Fund of Ukraine; monetary policy is analyzed by Viktor Yushchenko, who was chairman of the National Bank of Ukraine.
The major focus of the book is on the 1994-1999 period. The contributors analyze the first steps of reform, when Ukraine adopted its first program with the IMF and undertook such important policy measures as major price liberalization, budget deficit reduction and initial strides in privatization. The most interesting part of the book deals with the examination of various factors leading to a standstill of reforms in 1995, when in some areas reforms even went backward.
Conceptually, the book is built on the traditional and outdated development model that has been widely used by donors worldwide and was based on assumptions of rationality of choice, focus on the individual policymaker and explicit treatment of the process how individual actions aggregate into policy outcomes. The donors and local reformers believed that in the FSU a willing local government, operating within a deregulated economy supported by well-managed external capital inflow and technical assistance, might achieve significant expansion of the private sector. The free market would eventually reach equilibrium of supply and demand, thus allowing prices to reflect opportunity costs. Once a regulatory framework favoring the development of market relations was established, it would attract foreign investors and bring back previously exported hard currency. Eventually, increasing private wealth and a booming economy would create more taxable income. Also the need to collect more taxes would disappears as the government would be left with only a few major tasks to perform – it might intervene only to protect infant industries, develop infrastructure, and regulate monopolies.
Adoption of such untested assumptions in the post-Soviet context proved to be a gross oversimplification that led to improper government policies. As experts agree, the steady decline in living standards during the 1990s in Ukraine can be ascribed to weak governance. Monetary stabilization, tax reform, privatization and trade liberalization proved to be insufficient to produce a free market that equilibrates as completely as possible supply and demand, thus allowing prices to reflect opportunity costs. Widespread corruption, ineffective rule of law, inadequate protection of property rights, ill-advised policymaking serving special interests, lack of transparency and predictability in state’s policy decisions and other features reflecting the peculiar structure of governance in Ukraine negatively affected the process of economic reforms. Therefore it is very difficult to understand why such critical issues were left unexamined by the authors.
Some contributions stay aside from such a narrow vision of reforms. Viktor Pynzenyk’s article “How to Find a Path for Ukrainian Reforms” offers an interesting strategic vision of reforms in Ukraine. The author raises a question as to why a Ukraine that came so close to the possibility of achieving economic growth in 1996-97 lost its chance. A brilliant politico-economic analysis leads the author to the conclusion that the crisis in Ukraine is of a political nature and that «reformist forces in Ukraine do not enjoy sufficient political support to accomplish a significant breakthrough for reforms.»
Anders Aslund in his concluding article, “Why Has Ukraine Failed to Achieve Economic Growth?” tries to address a wide range of issues that may have contributed to the failure of Ukraine to achieve economic growth. Among many other things, the author examines the overall state of economic affairs, tests the validity of the argument that Ukraine suffered from Russian exploitation, and assesses the degree of rent-seeking in Ukraine. The article expands dramatically the narrow conceptual focus of the book by bringing to reader’s attention such issues as the quality of state administration, nature of Ukraine’s ruling elite and rent-seeking mechanisms developed in Ukraine.
The book may be of interest for scholars, policymakers and development practitioners who may benefit from the experiences of Ukraine’s complex way of reforms.