What type of What type of capitalism in Ukraine?capitalism in Ukraine?

Vlad MykhnenkoVlad MykhnenkoInternational Policy Fellow, CEU & Open Society InstituteInternational Policy Fellow, CEU & Open Society InstitutePh.D. Candidate, Faculty of Social and Political Sciences, UnivePh.D. Candidate, Faculty of Social and Political Sciences, University of Cambridgersity of CambridgeEE--mail: mail: mykhnenko@policy.humykhnenko@policy.huPaper presentation, 13Paper presentation, 13thth Annual Managing the Economic Transition Research Workshop, Annual Managing the Economic Transition Research Workshop, Jean Jean MonnetMonnet Centre for Excellence, University of Cambridge, UK (12 March 20Centre for Excellence, University of Cambridge, UK (12 March 2004) 04)

Key concepts for a Key concepts for a ‘‘variety of variety of capitalismcapitalism’’ analysisanalysis

!! The French RThe French Réégulation School and comparative political economy gulation School and comparative political economy approaches: approaches:

the capitalist mode of development = RoA + MoR the capitalist mode of development = RoA + MoR →→ outcomesoutcomesa)a) Regime of Accumulation = a production system with a specific Regime of Accumulation = a production system with a specific

technological style:technological style:-- extensiveextensive-- intensive (Fordism)intensive (Fordism)-- supersuper--intensive? (postintensive? (post--Fordism / Fordism / ��new economynew economy��))

b)b) Mode of Regulation = a set of institutional forms (Mode of Regulation = a set of institutional forms (��structural mediationsstructural mediations��) ) to guide and stabilise the accumulation process, i.e. to promoteto guide and stabilise the accumulation process, i.e. to promote coherence coherence of capitalismof capitalism-- competitive modecompetitive mode→→ laissezlaissez--faire capitalism, 1800sfaire capitalism, 1800s--1930s1930s-- monopolistic modemonopolistic mode→→ ��organisedorganised�� (co(co--operative corporate) capitalism, operative corporate) capitalism, 1940s1940s--1970s1970s-- neoneo--liberal mode liberal mode →→ ��disorganiseddisorganised�� capitalism, 1980s capitalism, 1980s �� presentpresent

c)c) performance = economic development + social progress (performance = economic development + social progress (��long waves long waves upswing v. long waves downswingupswing v. long waves downswing��))

Problematic issuesProblematic issues

!! The dichotomy of The dichotomy of ��organisedorganised�� & & ��disorganiseddisorganised��capitalisms v. the capitalisms v. the ��diversity of capitalismdiversity of capitalism��approach (German, Angloapproach (German, Anglo--American, American, Scandinavian, Japanese, etc.)Scandinavian, Japanese, etc.)

!! Methodology for studying the most advanced Methodology for studying the most advanced Western societies (GWestern societies (G--7; high7; high--income OECD)income OECD)

!! Traditional v. postTraditional v. post--communist types of communist types of capitalism (e.g. capitalism (e.g. ��oligarchicoligarchic�� / / ��hybridhybrid�� / / ��mutantmutant��))

The postThe post--communist transformation communist transformation of the Ukrainian political economy of the Ukrainian political economy

Issues to be addressed:Issues to be addressed:!! Performance under postPerformance under post--communism: communism:

economic growth and social progresseconomic growth and social progress!! Instruments of control and regulationInstruments of control and regulation!! What type of capitalism for Ukraine?What type of capitalism for Ukraine?

Ukraine's post-communist economic trajectory

40

45

50

55

60

65

70

75

80

85

90

95

100

105

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03

Vol

um

e in

dex

, 199

0 =

100

GDP Industrial output Agricultural output Electricity consumption

Ukraine's annual growth patterns

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1991 92 93 94 95 96 97 98 99 2000 01 02 03

An

nu

al g

row

th

GDP Industrial output

Two stages of UkraineTwo stages of Ukraine’’s posts post--communist transformationcommunist transformation

I.I. Decline: 1990 Decline: 1990 �� 19961996II.II. Recovery: 1997 Recovery: 1997 �� presentpresent"" Two transformation phases Two transformation phases ↔↔ two different two different

modes of regulationmodes of regulationI.I. ��Chaotic capitalismChaotic capitalism�� (Lane 1999; 2000) (Lane 1999; 2000) →→

UkraineUkraine��s Great Posts Great Post--Communist DepressionCommunist DepressionII.II. ��Combine capitalismCombine capitalism�� (= state(= state--initiated initiated

conglomerateconglomerate--propelled) propelled) →→ economic economic recovery and growth; and social progress?recovery and growth; and social progress?

What is a What is a ‘‘chaotic capitalismchaotic capitalism’’??

!! ��A chaotic social formation may be defined as a social A chaotic social formation may be defined as a social and economic system which lacks institutional and economic system which lacks institutional coordination and promotes social fragmentation: goals, coordination and promotes social fragmentation: goals, law, governing institutions and economic life lack law, governing institutions and economic life lack cohesion. Its characteristics are uncertainty about the cohesion. Its characteristics are uncertainty about the future, elite disunity, the absence of a dominant and future, elite disunity, the absence of a dominant and mediating class system, a mixture of media of exchange, mediating class system, a mixture of media of exchange, criminalisation and corruption, rentcriminalisation and corruption, rent--seeking seeking entrepreneurs, inadequate interest articulation and an entrepreneurs, inadequate interest articulation and an economy in decline characterised by inflation, economy in decline characterised by inflation, unemployment and poverty. Whereas unemployment and poverty. Whereas ��disorganised disorganised capitalismcapitalism�� does not lead to breakdown, a chaotic social does not lead to breakdown, a chaotic social formation is perverse and system is precariousformation is perverse and system is precarious�� (Lane (Lane 2000: 4972000: 497--98).98).

UkraineUkraine’’s posts post--communist modes of communist modes of regulation: from regulation: from ‘‘chaoticchaotic’’ to to ‘‘combinecombine’’

!! MoR spheres of guidance and stabilisation:MoR spheres of guidance and stabilisation:a)a) the role of the state and form of state economic the role of the state and form of state economic

managementmanagementb)b) the form of capital the form of capital �� labour relationslabour relationsc)c) the nature of competition between firms (from the nature of competition between firms (from

plan to market?)plan to market?)d)d) motivational system (values, profits, investments)motivational system (values, profits, investments)e)e) the place of national economy within the the place of national economy within the

international system international system

The The ‘‘chaoticchaotic’’ mode of regulation: mode of regulation: major features in Ukrainemajor features in Ukraine

!! a rapid withdrawal of the state from the economy and dea rapid withdrawal of the state from the economy and de--statisation of social statisation of social welfare; welfare; ��no industrial policy is the best industrial policyno industrial policy is the best industrial policy��

!! the most unbalanced monetary and credit arrangements; repeated mthe most unbalanced monetary and credit arrangements; repeated monetary onetary validation of evervalidation of ever--continuing inflationary shocks; deficit budget spending continuing inflationary shocks; deficit budget spending accommodated via escalating money emissions (= cash printing) accommodated via escalating money emissions (= cash printing)

!! no mediating role for the state within increasingly antagonisticno mediating role for the state within increasingly antagonistic industrial relations; industrial relations; the hegemony of capital over labour the hegemony of capital over labour →→ no wage bargaining occurs; earned wages no wage bargaining occurs; earned wages and salaries are regularly unpaid to be used by the owners and mand salaries are regularly unpaid to be used by the owners and managers as a cushion anagers as a cushion against bankruptcy; the minimum wage, if exists at all, is set bagainst bankruptcy; the minimum wage, if exists at all, is set by the state at a level far y the state at a level far below the physical subsistence level below the physical subsistence level

!! under macroeconomic instability accompanied by the privatisationunder macroeconomic instability accompanied by the privatisation drive, drive, microeconomic competition is not carried out though the price memicroeconomic competition is not carried out though the price mechanism within chanism within the regulated market place between various firms, but is conductthe regulated market place between various firms, but is conducted in a form of ed in a form of ungoverned and physically most brutal struggle between individuaungoverned and physically most brutal struggle between individual entrepreneurs l entrepreneurs themselves for the chunks of statethemselves for the chunks of state--owned property and for free or even negatively owned property and for free or even negatively charged loans issued directly by the central bankcharged loans issued directly by the central bank

!! motivational system is based upon rentmotivational system is based upon rent--seeking and assetsseeking and assets--stripping stripping !! on a global scale, the national economy which is governed by theon a global scale, the national economy which is governed by the chaotic mode of chaotic mode of

regulation fails to diversify its major trading partnership and regulation fails to diversify its major trading partnership and remains on the remains on the periphery of the international economyperiphery of the international economy

Changing the role of the postChanging the role of the post--communist state in communist state in Ukraine: slowing down the stateUkraine: slowing down the state’’s withdrawals withdrawal

The pace of Ukraine's de-statization

0.0%0.5%1.0%1.5%2.0%2.5%3.0%

3.5%4.0%4.5%5.0%5.5%6.0%6.5%

1990-1996 1997-2002

aver

age

per

per

iod

Average annual decrease in the public ownership of physical capital stock

Mixed property rights structureMixed property rights structureUkraine: ownership structure, 2002

0 10 20 30 40 50 60 70 80 90 100

Total labour force

Fixed capital assets

Agricultural land

Agricultural production

Industrial production

percentage of total

Private ownership (individual or collective) Public ownership (state or municipal)

Returning to welfare provisionReturning to welfare provisionChanging public spending priorities

46.3%36.3%

56.2%

53.7%63.7%

43.9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1996 2002

shar

e of

tot

al b

ud

get

exp

end

itu

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O ther publicexpenditure

Publicexpenditure onsocia l welfareprovision (healthcare, social workand protection,culture, science& education)

Facilitating the business Facilitating the business environmentenvironment

!! The Business Environment and Enterprise The Business Environment and Enterprise Performance Surveys (World Bank and EBRD).Performance Surveys (World Bank and EBRD).

Qualitative assessments of the business environment: Qualitative assessments of the business environment: average score by dimension on a scale from 1 (=minor obstacle) taverage score by dimension on a scale from 1 (=minor obstacle) too4 (=major obstacle)4 (=major obstacle)

2.082.082.672.67PostPost--communist communist countriescountries�� medianmedian

2.222.222.772.77UkraineUkraine

2002200219991999

Business environment, 1999

1.0

1.5

2.0

2.5

3.0

3.5

4.0Finance

Infrastructure

Taxation

RegulationJudiciary

Crime

Corruption

Poland Ukraine

Business environment, 2002

1.0

1.5

2.0

2.5

3.0

3.5

4.0Finance

Infrastructure

Taxation

RegulationJudiciary

Crime

Corruption

Poland Ukraine

The Ukrainian state: from pulling out to The Ukrainian state: from pulling out to bringing back?bringing back?

Ukraine's public spending trajectory

Consolidated budget expenditure

General government sector expenditure

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

1992 93 94 95 96 97 98 99 2000 01 02 03

Shar

e of

GD

P

The form of capital The form of capital –– labour relations: from labour relations: from social antagonism to social accord?social antagonism to social accord?

Increase in tripartite wage bargaining and decrease in industriaIncrease in tripartite wage bargaining and decrease in industrial disputesl disputes

0

2 0 ,0 0 0

4 0 ,0 0 0

6 0 ,0 0 0

8 0 ,0 0 0

1 0 0 ,0 0 0

1 2 0 ,0 0 0

1 4 0 ,0 0 0

1 6 0 ,0 0 0

1 8 0 ,0 0 0

1 9 9 6 9 7 9 8 9 9 2 0 0 0 0 1 0 2

nu

mb

er o

f st

rik

ers

5 5 %

6 0 %

6 5 %

7 0 %

7 5 %

8 0 %

8 5 %

shar

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al w

ork

forc

e

S t rik in g w o rk e rsC o l le c t iv e w a ge -ra te a gg re m e n ts c o v e ra ge , p e rc e n ta ge o f to ta l w o rk fo rc e

Real wage growth

-55%-50%-45%-40%-35%-30%-25%-20%-15%-10%

-5%0%5%

10%15%20%25%30%

1992 93 94 95 96 97 98 99 2000 01 02 03

ann

ual

gro

wth

More secure jobs?More secure jobs?Ukraine: ILO unemployment

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

15%

1995 96 97 98 99 2000 01 02 03

shar

e of

tot

al e

con

omic

ally

act

ive

pop

ula

tion

Long way round neoLong way round neo--corporatismcorporatismW age d iffe ren tiation w ith in m an u factu r in g

1 .0 0

1 .2 5

1 .5 0

1 .7 5

2 .0 0

2 .2 5

2 .5 0

2 .7 5

3 .0 0

3 .2 5

3 .5 0

3 .7 5

4 .0 0

4 .2 5

4 .5 0

4 .7 5

1 9 9 0 1 9 9 6 2 0 0 2 2 0 0 2 2 0 0 2 2 0 0 2 2 0 0 1 2 0 0 2 2 0 0 2

U k ra ine S w eden G erm a ny U K U S A S .K orea M a la y s ia

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) v.

th

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aid

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Information and coInformation and co--ordination structure: towards ordination structure: towards the full combination of available mechanismsthe full combination of available mechanisms

State intervention + Markets + NetworksState intervention + Markets + Networks!! Industrial policy (since midIndustrial policy (since mid--1990s): subsidies for mining 1990s): subsidies for mining

and quarrying; tax allowances, proand quarrying; tax allowances, pro--innovation innovation preferential treatment and copreferential treatment and co--investment projects in investment projects in other industriesother industries

!! Regional policy (since late 1990s): special economic Regional policy (since late 1990s): special economic zones (taxzones (tax--free areas) and priority development areas free areas) and priority development areas (special investment regime)(special investment regime)

!! However, active developmental policies are hindered by However, active developmental policies are hindered by low state expenditurelow state expenditure

!! TwoTwo--tier corporate structure: giant conglomerates and tier corporate structure: giant conglomerates and small & medium firmssmall & medium firms

UkraineUkraine’’s Five Grand National Masterss Five Grand National Masters

��Five players have appeared on UkraineFive players have appeared on Ukraine��s business s business field. The five players who have reached not only the field. The five players who have reached not only the level of masters but that of grand masters. We would level of masters but that of grand masters. We would like the rest to catchlike the rest to catch--up with them up with them �� We should also We should also draw a thick line and not allow foreign penetration into draw a thick line and not allow foreign penetration into strategic sectors strategic sectors �� Foreign penetration could be a Foreign penetration could be a threat to this statethreat to this state��s national economic interestss national economic interests��

-- Mykhailo ChechetovMykhailo ChechetovHead, The State Property Fund of Ukraine Head, The State Property Fund of Ukraine

(press(press--conference in Kyiv, 26 December 2003)conference in Kyiv, 26 December 2003)

UkraineUkraine’’s largest conglomeratess largest conglomerates

!! The Big Five:The Big Five:1.1. The Industrial Union of the Donbas (The Industrial Union of the Donbas (ISDISD; Donetsk; Donetsk--

based; owners: Vitaliy Hayduk, Serhiy Taruta and Viktor based; owners: Vitaliy Hayduk, Serhiy Taruta and Viktor Yanukovych)Yanukovych)

2.2. System Capital Management (System Capital Management (SCMSCM; Donetsk; Donetsk--based; based; owner: owner: RynatRynat Akmetov)Akmetov)

3.3. The The InterpipeInterpipe Group (DnipropetrovskGroup (Dnipropetrovsk--based; owner: based; owner: Viktor Pinchuk)Viktor Pinchuk)

4.4. The Private Bank Group (The Private Bank Group (Hrupa PryvatHrupa Pryvat; Dnipropetrovsk; Dnipropetrovsk--based; owner: Ihor Kolomoyskyi)based; owner: Ihor Kolomoyskyi)

5.5. The UkrainianThe Ukrainian--Siberian Bank (Siberian Bank (UkrSybBankUkrSybBank; Kharkiv; Kharkiv--based; owner: Oleksandr Yaroslavskyi)based; owner: Oleksandr Yaroslavskyi)

The rest:The rest:

1.1. The Donbas business group members: The Donbas business group members: D.A.N.K.O D.A.N.K.O (Donetsk(Donetsk--based; cobased; co--owner: Serhiy Momot) and owner: Serhiy Momot) and A.R.S. A.R.S. (Donetsk(Donetsk--based; owner: Ihor Humeniuk)based; owner: Ihor Humeniuk)

2.2. The Finance & Credit Bank Group (The Finance & Credit Bank Group (HrupaHrupa Finansy i Finansy i Kredyt; Kredyt; KyivKyiv--based; owners/associates: Kostiantyn based; owners/associates: Kostiantyn Zhevaho; Volodymyr Khlyvniuk)Zhevaho; Volodymyr Khlyvniuk)

3.3. The Ukrainian Industrial Investments Group The Ukrainian Industrial Investments Group ((UkrPromInvestUkrPromInvest; Kyiv; Kyiv--based; owner: Petro Poroshenko)based; owner: Petro Poroshenko)

4.4. Dynamo Kyiv F.C. Group (Dynamo Kyiv F.C. Group (Hrupa DynamoHrupa Dynamo; Kyiv; Kyiv--based; based; owner: Hryhoriy Surkis)owner: Hryhoriy Surkis)

The Industrial Union of the Donbas (ISD)Chairman of the Board: Mr. Serhiy Taruta (aged 48); CEO: Mr. Oleh Mkrtchian(aged 36)

Conglomerate headquarters: Donetsk, Ukraine; Conglomerate total revenues: US$ 5.1 billion (2003)Founded December 1995; reportedly by Messrs Akhat Brahyn (a.k.a Alek �The Greek�, assassinated 1995), Yevhen Shcherban (assassinated1996), Vitaliy Hayduk et al; formal institutional founders: Vis-a-Vis Close Joint-Stock Co; AzovInTex Ltd; Ukrainian Technological Sciences

Academy; Ukrainian Economic Sciences Academy; Donbas Chamber of Commerce and Industry

Ferrous Metals: over 95% sharecontrol on average

Shares

Alchevsk Iron &Steel Combine

MarkokhimMariupol Coke

Works

Alchevsk Coke &Chemicals

Khartsyzsk TubeWorks

Dniprovsk TubeWorks

Engineering: > 30% control

KramatorskKuibyshev Iron &Steel Combine

EnergomashspetsstalEngineering Special

Steels

Shares

UkrVuhleMashCoal-MiningMachinery

AzovMashMariupolMachine-BuildingFactory

SlovianskHeavy

Machine-BuildingFactory

Mining and Quarrying, Fuel andPower: > 60% control

Shares

DONETSKINDUSTRIAL

UNION,Subsidiary

Agriculture: 100%control

Shares

Ol'ha Agro Firm

Zoria Agro Firm

Dianovske PoultryFarm

BakhmutAgricultural Union

Northern Iron OreConcentrating

Combine

Krasnyi LymanCoal Mine

StrategicAlliances

DunaFerr Iron &Steel Combine

(Hungary)

KrasnoarmiiskCoal Mine

Bazhan Coal Mine,MakiivCoal State

Holding Co.

RodynskeCoal Mine,

KrasnoarmiiskCoalMining Association

Kholodna BalkaCoal Mine,

MakiivCoal StateHolding Co.

Northern CoalMine, MakiivCoalState Holding Co.

Communist CoalMine, OctoberCoalState Holding Co.

Horlivka MeatPacking factory

Karanske GrainElevator

InvestAgroService

SnezhnoeKhimMashChemicalMachinery

Old KramatorskHeavy

Machine-BuildingFactory

DruzhkivkaMachine-BuildingFactory

KamianskMachine-BuildingFactory

Horizon MiningRescue

MachineryPlant

ShaktyMachine-BuildingFactory(Russia)

KramatorskHeavy

Machine ToolConstruction

Factory

Krasnyi LuchMachine-BuildingFactory

UkrIndustryMetals

EngineeringConsortium

Finance, Investment, andConstruction: > 80 - 100%

Shares

DonetskStock

Exchange UzNaftoHazBudUzbek Oil & Gas

Construction(Uzbekistan)Keramet

InvestmentCompany

PanteleimonivkaFire Clay Factory

KramatorskPushka Cement &

Slate Combine

Donbas BudConstruction

Trust Co.

Azov-EasternSpecial

EconomicZone

Fedorov MiningMechanics R&D

Institute

Other Service Activities:>80 - 100% control

Shares

Metalurg DonetskFootball Club

ISD-AVIA AirCompany

Yalta-Intourist HotelComplex

DnipropetrovskPetrovskySteelworks

DniproDzerzhynskyIron & Steel

Combine

StrategicAlliances

DufercoInternationalSteel Trading(US-Brasilian

TNC)

Region-wideElectricity & Natural

Gas Whole-saleDistribution

Energy Construction and Operation projects:3 Gas pipe-lines (=200 km-long), Donbas;

1 Gas pipe-line (150 km) and 2 OilStorehouses (3 mil. barrels), Uzbekistan

Various construction projects(motorways, buildings, stadiums)

DonHirMashDonetsk Mining

MachineryFactory

AzovZahalMashMariupol

Machine-Building

System Capital ManagementPresident: Mr. Rynat Akhmetov (aged 38; over 90% of shares); CEO: Mr. Ihor Prasolov (aged 42)

Founded November 2000 by Mr. Akhmetov, formerly one of the principal ISD�s share-holdersConglomerate headquarters: Donetsk, Ukraine

Ferrous Metals and Engineering

Shares StrategicAlliances

Kerch Iron & SteelCombine (>24%)

Yenakieve Iron &Steel Works (>58%)

D.A.N.K.O.

Khartsyzsk TubeWorks (>24%)

Silur Khartsyzsk WireMill

LemanCommodities S.A.

(Switzerland)

A.R.S.

Resources and Raw Materials

SkhidEnergoEastern Electric

Power & HeatStations

Azovstal Iron &Steel Combine

Avdiivka CokeWorks (>57%)

AzovstalTrading House

(>52%)

Zaporizhzhia CokeWorks (>20%)

Embrol UkraineLtd.

Shares

Druzhkivka OreBoard (>27%)

Central Iron OreConcentrating

Combine (>25%)

Joint-Venture HefestLtd

Petrol Stations(>60%)

MarkokhimMariupol Coke

Works

Banking and Finance

Shares

DonMiskBank (DonetskCity Bank; 100%)

First UkrainianInternational Bank

ASKA InsuranceCompany (>17%)

Food and Drink

Transport, Communications & Other Service Activities

AzovMash MariupolMachine-Building

Plant (>50%)

Shares

Digital CellularCommunications Joint-VentureMobile Phone Network (>51%)

Shakhtar DonetskFootball Club (99%)

Donbas Palace Hotel(99%)

Atlant Hotels (>50%)

Ukraine TV & Radio Company(98%)

Segodnya PublishingGroup (85%)

Shares

SarmatDonetsk

Brewery (98%)Dnipro

DnipropetrovskBrewery (>51%)

CrimeaSimferopol

Brewery (93%)Kyiv BreweryNo. 1 (>76%)

Luhansk Brewery(>90%)

Poltava PyvoBrewery(>50%)

Donetsk BakeryComplex No. 1

(>24%)

DonetskBakery No. 14

(>46%)

Ukrainian Industrial & TransportCompany

Luxe Hotel (>60%)

KuybyshevKramatorsk Iron &

Steel Works (>24%)

Makiivka BakeryComplex (>23%)

Kharkiv Coke Works(>80%)

Donetsk EnergyPlant (>24%)

Druzhkivka Machine-Building Plant

(>15%)

Donetsk BakeryCombine(>16%)

October OresConcentration

Factory

Dobropillia OresConcentration

Factory

Keramet InvestmentCompany

Motivational system: from rentMotivational system: from rent--seeking & seeking & rentrent--taking to capital accumulation via profit taking to capital accumulation via profit

& investment& investmentFixed cap ital investm ent

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03

ann

ual

gro

wth

Profits and capital investments

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

1992 93 94 95 96 97 98 99 2000 01 02 03

mil

lion

hry

vnia

Enterprise gross profits Fixed capital investment

Positioning within the international political Positioning within the international political economy: from the Soviet autarky towards economy: from the Soviet autarky towards

geographical diversificationgeographical diversificationU k r a in e : f o r e ig n t r a d e d is t r ib u t io n

5 7 . 7

3 5 . 12 7 . 3

7 4 . 5

5 6 . 4 5 4 . 1

1 9 . 0

2 9 . 83 3 . 3

1 8 . 0

3 1 . 5 3 2 . 7

1 8 . 0

2 3 . 7 2 8 . 2

3 . 06 . 0 7 . 0

0 . 74 . 4 5 . 9

1 . 0 0 . 8 1 . 03 . 9 4 . 5 3 . 4 3 . 0 4 . 2 2 . 90 . 7 2 . 4 1 . 8 0 . 5 0 . 9 2 . 10 . 0 0 . 1 0 . 1 0 . 0 0 . 2 0 . 3

0

2 5

5 0

7 5

1 0 0

1 9 9 4 1 9 9 8 2 0 0 2 1 9 9 4 1 9 9 8 2 0 0 2

M e rc h a n d i s e e x p o r t s M e rc h a n d i s e i m p o r t s

per

cen

tag

e sh

are

of t

otal

A u s t ra l i a a n dO c e a n i a

S o u t h A m e r i c a a n dt h e C a r i b b e a n

N o rt h A m e r i c a

A f r i c a

A s i a

E u ro p e

F o rm e r U S S R

Climbing the exports ladder Climbing the exports ladder backwards backwards

Ukraine: exports structure

10 .1 11 .8 11 .4

10 .9 10 12 .50 .6 0 .9

1 .913 .7 13 .2 9 .3

39 .543 .9 44 .6

21 .9 13 .9 13 .6

3 .34 5 .6

0 2 .3 1 .1

0

25

50

75

100

1994 1997 2002

per

cen

tag

e sh

are

of e

xpor

ts

Artic les nonclassified elsew here

Miscellaneousmanuf. artic les

Machinery andtransport equipment

Manufacturedgoods, c lassif. bymateria lChemica l products

O ils, fa ts and w axes

Crude materia ls,minera ls and energy

Food and liveanimals, drink andtobacco

The The ‘‘combinecombine’’ mode of regulation: mode of regulation: mixed signs of successmixed signs of success

a)a) the return to prothe return to pro--active developmental state (=economic active developmental state (=economic nationalism) and the increased level of intervention through nationalism) and the increased level of intervention through industrial policy; yet hindered by low level of public spendingindustrial policy; yet hindered by low level of public spending

b)b) the suspension of unregulated labour market policies and the the suspension of unregulated labour market policies and the establishment of certain neoestablishment of certain neo--corporatist arrangements corporatist arrangements

c)c) the combination of markets, indicative planning, and networks the combination of markets, indicative planning, and networks (hybrid contracting); two(hybrid contracting); two--tier corporate structure tier corporate structure →→ competition of competition of conglomerates within international markets and negotiation conglomerates within international markets and negotiation between the conglomerates within the domestic market + between the conglomerates within the domestic market + competition of small and medium firms on domestic and world competition of small and medium firms on domestic and world marketsmarkets

d)d) the return to accumulation of capital through profit and investmthe return to accumulation of capital through profit and investment ent as the basis of value systemas the basis of value system

e)e) the insertion of the national economy into the international systhe insertion of the national economy into the international system, tem, occupying low valueoccupying low value--added niches added niches

## Will Will ��combine capitalismcombine capitalism�� accelerate Ukraineaccelerate Ukraine��s social progress?s social progress?

HungaryLithuaniaCroatiaLatviaBelarusBulgariaMacedoniaRussiaRomaniaKazakhstan

TurkmenistanAlbania

Moldova

Tajikistan

Slovenia

Ukraine

High human development

Medium human development

High HDI average

Medium HDI average

PolandSlovakiaEstonia

Bosnia

GeorgiaAzerbaijanArmenia Uzbekistan

Kyrgyzstan

Czechia

Post-communist average

Developing countries

High-income OECD

0.650.660.670.680.690.7

0.710.720.730.740.750.760.770.780.790.8

0.810.820.830.840.850.860.870.880.890.9

0.910.920.93

1990 1995 20010 – 0.5= poor human development; 0.501 – 0.8= medium human development; 0.801

– 1.0= high human development

HD

I va

lue

What type of capitalism for Ukraine?What type of capitalism for Ukraine?

!! The shift from The shift from ��chaoticchaotic�� to to ��combinecombine�� capitalism capitalism →→economic recovery and growtheconomic recovery and growth

!! However, the pace of catchingHowever, the pace of catching--up is sluggish; human and up is sluggish; human and social development indicators are still far below the presocial development indicators are still far below the pre--transformation levelstransformation levels

!! There is a need for enhancing the state capacity, if There is a need for enhancing the state capacity, if industrial policies to be made effectiveindustrial policies to be made effective

!! More stateMore state��s s ��steeringsteering�� of conglomerates towards the high of conglomerates towards the high valuevalue--added technological styleadded technological style

!! New sources of capital investment to intensify the national New sources of capital investment to intensify the national regime of accumulationregime of accumulation