Ukraine: Economic Positioning or Death


Ukrainian phenomenon of economic dependence is complex and multi-level. It includes the reaction to global economic development trends, as well as to the labor distribution accepted in the world. Besides, it is also rooted out in its own historical background – formation of political elites and peculiarities of social policy. As a result, Ukraine ended up having no raw materials, resources and technologies, causing structural shortcoming of the economy, which continues to decline.

At the current stage of globalization, Ukraine appeared under strong pressure of transnationalism and forced liberalization, as well as under the influence of integration unions – the new instrument of economic power. That combination of challenges to economic sovereignty of a state is a sign of neodependence. This puts on the agenda the search for a nationally determined model of development instead of the universal model, like Washington consensus. Although, homegrown reformers continue to replicate Georgia, Lithuania or Poland recipes for success, it should finally become clear that this strategy is initially wrong.

Reforms implemented according to a unified model risk being rejected through their inadaptability to the national conditions. Certainly, a transition model requires a breakdown of the old system and establishment of a new one. Considering that the transition does not run automatically, confrontation between national and global interests is very likely.

Being aware of global tendencies, it’s necessary to move from “pursuit trajectory” to “proactive movement”. Blind replication of foreign recipes for success neglecting new historical challenges and global transformation processes is meant to fail. Looking for its own recipe for success, Ukraine should take into consideration experience of other countries:

1. Forced application of liberalism to less developed countries threatened to stop them from moving up to the next stage of economic development.

2. Each national economy has its own level of so-called moderate protectionism – acceptable amount of trade restrictions compared to globally accepted one. It can be considered a starting point in the search for the effective foreign trade policy.

3. In conditions of loss of traditional markets for Ukrainian products, moderate liberalism can become an instrument of anti-crisis policy. Moratorium on raw materials exports would stimulate manufacturing and contribute, among other things, to the announced structural reforms in the country. It’s also necessary to use bilateral negotiations in order to settle trade relations and build compromises with partner-states 

4. In Ukraine, a model of economic growth based on value chains, would stimulate social and economic development. Inflow of investment, products, services and knowledge, inherent to value chains, would encourage industrial re-equipment of Ukraine. Value chains ensure better access to information, new knowledge and skills in technologies. This would encourage Ukrainian companies to establish new industrial sectors, which would define international specialization of the country.

5. Fragmentation of production in global value chains is considerably more intensive in the fields where technical characteristics of a product enable to divide the production process into separate stages. Therefore, Ukraine urgently needs an active industrial policy. Currently, it’s shadowed by pseudo-liberal ideas of Ukrainian competitive advantage in alternative sectors of economy like service industry. But it’s the modality of a product that gives an opportunity to benefit from advantages of international labor division and dislocate separate stages of production process in Ukraine, especially in such sectors, as electronic appliances, devices and vehicle engineering.

This also applies to high-tech sector of chemical industry and, to a lesser extent, to such traditional sectors as mining and raw materials production (oil refining, ferrous and nonferrous metallurgy, chemical industry, and rubber and plastic production). Industries of the primary production sector normally don’t require high import content in exports. However, they serve as initial links to value chains, i.e. they create a production resource for other sectors.

6. Reduction of budget deficit burdens Ukrainian citizens, who directly experience consequences of restriction policy in macroeconomics. Currently, Ukraine is faced with the increase of fiscal burden on population, reduction of social expenses, negative influence from the drop of economic activity and consumer demand, disabled investment function of the state and devaluation of national currency. Such a combination of negative influences threatens economic safety of the state.

7. Ukraine is forced to sell national assets, since it’s one of key recommendations of the IMF aimed at eliminating state budget deficit. Enterprises sold under such circumstances are unlikely to bring long-term economic profit, but, instead, will increase their dependence on foreign funding. Thus, recommendations of international institutions are often confusing: privatization often deprives a state of its assets instead of reinforcing economy. Moreover, hasty privatization, encouraged by the IMF and separate institutions of the World Bank, demonstrates that these organizations pursue interests of key players in the global economy.

It should be acknowledged that Ukrainian positioning model in global economy, for the first time since its independence, has received a chance to turn from purely inertial into the model capable of transforming the existing vicious circle of dependence under the influence of political pressure. Although, in Ukraine, these transformations have to be implemented in each component of economic dependence separately, which involve dependence on raw materials, resources, trade, technologies, finances, debts, currency rates, investment and migration.

Ukrainian neodependence is a challenge to national security of the state, since the combination of the above mentioned vulnerable aspects demonstrates the need to maneuver in the area of global challenges. Neodependence in Ukraine is determined by key players of global economy exerting pressure on its sovereignty. Therefore, the search for unified and standardized responses to global processes is a road to nowhere. Priority task is not just political, but economic diplomacy and promotion of national idea of economic recovery.


Natalia Reznikova, Volodymyr Panchenko


Dzerkalo Tyznya


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