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After the fall of the Soviet Union creating an economically sound Ukraine
proved to be an extraordinary challenge, perhaps the biggest challenge comes from the
lack of balance and participation in both the political and economic spheres. Currently
Ukrainian efforts at continued economic success and growth have largely been failures,
growing shadow economy; Ukraineʼs future greatly depends on the unification and
has not been easy and is no where near complete. After the USSRʼs dissolution
Ukraine was forced to decide how the newly independent country would look, feel and
function apart from the USSR. In order to recreate the Ukraine, a new political and
officials made it an objective to earn entrance into the European Union and to
participate within the World Trade Organization (pp. 5-6 Samokhvalov). Ukraine now
needed to transform their politics and their economy to meet stringent European
industrial resources along with an educated workforce (pp. 53-54 Canadian Scholars &
p. 11 Shcherbak et al.). However, after decades of Soviet control the Ukraine faced the
monumental challenge of entering a world economy after being restricted to the Soviet
economy. Ukraineʼs omission from the global market and its limited competition within
growth (pp. 8-9 Kravchuk). Ukraine was grossly underprepared to face an entire world
of booming, thriving, free market industry. So, the question remained about how to take
Soviet economic system in place into a free-market social economy (p. 58 Canadian
officials chose a system of gradualism to slowly move Ukraine into the new economy (p.
50 Zon). During this time multiple systems arose which attempted to create a gradual
economic solution for the new country. Of the many systems, two became key
Ukraine more independent, Ukraineʼs economy would be more impervious to the market
extremes and the negative economic effects from political turbulence in former Soviet
states (p. 11 Kravchuk). The pragmatist approach focuses on creating a secure and
thriving economy as the baseline for Ukrainian independence, with much of the
economy focused on creating and maintaining close industrial and trade relationships
with Russia (p. 8 Samokhvalov). While these are two of the many options that were
1000% and the real budget deficit was 25%-30% of Gross Domestic Product (pp. 50-51,
53 Zon).
independent Ukraine by reducing debt, creating and implementing the Ukrainian hryvnia
President Kuchmaʼs plan would raise Ukrainianʼs faith in the new economic system and,
Ukrainian economy was all but deserted. President Kuchma faced strong opposition
from parliament and from the politically elite (p. 65 Kravchuk). It became evident that a
plan focusing on pro-independence goals would be too costly for the elite and too
Ukraineʼs Gross Domestic Product to remain at -12.2% which contributed to the mass
With one failure under his belt, in late 1995 President Kuchma put Prime
Minister Marchuk in charge of creating and developing another economic program to fit
the Ukrainian peopleʼs needs. After the pervious failure it was decided that the country
should follow a program reflective of Ukraineʼs unique perspective and history, thus, the
“Ukrainian Model” of reform goals was written and implemented (p. 68 Kravchuk). While
the idea if implementing a model to reflect the individual needs of a country seems on
parliament may be the root cause of previous reform failure, not an inefficient model.
None the less, Prime Minster Marchuk produced a new program which was very similar
to that of President Kuchmaʼs original 1994 program; however, it slowed down the rate
passed through the parliament without any problems; however, just like President
continued to compose policies and to pass laws which explicitly ignored the laws and
regulations laid out by Marchuk (pp. 68-69 Kravchuk). By mid 1996 President Kuchma
had fired Prime Minster Marchuk and had completely abandoned Marchukʼs plan for
economic reform (p. 70 Kravchuk). It is interesting to note that the inclusion of the
actions. In fact, the modelʼs failure clearly illustrates the Ukrainian parliamentsʼ
especially highlighted by looking at countryʼs Gross Domestic Product rate which was a
dismal -10% at the time (p. 1 Shcherbak et al.). Without a supported plan of action,
President Kuchma attempted another economic reform program, this time with the help
of Deputy Prime Minister Pynzenyk (p. 71-72 Kravchuk). Pynzenykʼs program was
even more far reaching than that of President Kuchmaʼs first attempt and it was again
passed through the parliament without issues. However, the parliament neglected to
approve or enact any of the new tax laws and regulations that were needed to make the
reformation a reality. After fighting and failing to get the new laws implemented
Pynzenyk resigned from his position, and the economy continued to fail (p. 72
Kravchuk). While history does allow for 20/20 vision, it still appears strange that
members of parliament would ignore a failing economy and the serious repercussions it
has on Ukraineʼs future. As mentioned previously, the rate if migration from 1990-1999
caused the population of Ukraine to fall by a third (p. 9 Shcherbak et al). Losing one
dramatically increases. Also, another drastic side effect of losing a third of the
dramatically lowers the birthrate of a country which inevitably affects a countryʼs ability
to sustain economic growth; without a workforce the countryʼs economy will continue fail
and a parliament clearly against any sort of economic reform that possessed short term
pain but long term results, President Kuchma was forced to implement yet another new
program aimed at eliminating national debt and increasing real economic growth.
However, this task did not come with ease, as additional trouble loomed with the fall of
the Asian and Russian markets (p. 7 Shcherbak et al). Kuchmaʼs new program needed
to correct not only Ukraineʼs floundering economy, but it also needed to meet
international standards to allow Ukraine to continue collecting loan money from the
International Monetary Fund. Kuchma put into action a plan which put the government
in control of banks, restricted currency and allowed the government to print more money
(p. 77 Kravchuk). Kuchmaʼs new program met neither the requirements of the
International Monetary Fund nor the requirements of the World Bank; therefore, funding
was immediately ceased causing inflation to climb, resulting in the hryvniaʼs value to fall
drastically (p. 78 Kravchuk). Kuchmaʼs continued failure prompted him to pull together
a new plan of action which would provide short term and long term goals for Ukraine
called “Ukraine 2010” (pp. 80-81 Kravchuk). Naturally, these new goals emerged just in
managed to keep him afloat and helped him secure the presidency for an additional five
years (pp. 80-81 Kravchuk). During this presidency Kuchma chose Viktor Yushchenko
transform Ukraineʼs political atmosphere into one of progress and reform. Yushchenko
implemented a new plan called “1,000 Days of Reform in Ukraine.” This program
however, it still neglected the international approval that would allow the Ukraine to
receive international loans (pp. 83-86 Kravchuk). Even with harsh criticism and many
set backs, Yushchenkoʼs reform program began to work, by 2000 the results were
measurable, GDP was up 6%, industrial output rose 12.9% and agriculture grew 9.2%
all the while debt began to decrease and the hryvniaʼs value began to stabilize (pp. 7-8
Shcherbak et al). Even though it took countless years to create an economic program
with results, Yushchenkoʼs results prove that Ukraine does possess the potential to
Prime Minister, he and Kuchma did not see eye to eye on many issues (p. 84
Kravchuk). After the end of a long power struggle, Kuchma eventually relieved
After the end of Kuchma's Presidency it became clear that the election of 2004
would not be an easy battle to win. During the election year Yanukovych and
Yushchenko went head to head for the presidency. The results of the 2004 election
declared Yanukovych the winner (Arvedlund). However, this result came with much
criticism as speculation grew over the election results (Arvedlund). The Ukrainian
people felt the results were a forgery and they began to protest the election (Arvedlund).
With so many people rallying for Yushchenko, Ukrainians took his campaign color of
orange and used it as the symbol of the revolution. The Orange Revolution continued
to explode within the country until officials finally agreed on a re-vote. Yushchenko
received 51.99% of the votes, thus making him Ukraineʼs new president (pp. 1-2
Woehrel). The Orange Revolution became a huge turning point in Ukraine; it came to
themselves. Furthermore, the Orange Revolution could have caused a civil war or had
other severe costs, yet the protest remained peaceful and the country did not collapse
Ukrainianʼs perception of the country; the people had a renewed faith in democracy.
By proving the Ukraine was a country able to stand up for democracy, Ukraine
more then ever wanted entrance into the European Union and the World Trade
least validation from these organizations would help to solidify Ukraineʼs new position
(p. 11 Samokhvalov). While the European Union and the World Trade Organization has
yet to allow Ukraine entrance, they have looked favorably at the Ukraine for their
attempt to stabilize and legitimize democratic values (pp. 9-10 Samokhvalov). However,
the lingering shadow economy still dramatically limits Ukraine's economic future and
keeps them out of the European Union and the World Trade Organization.
Ukraine's shadow economy has long caused serious economic and political
organizations, and poor democratic development (p. iv USAID). The Ukrainian economy
is trapped in a system controlled by elite cartels (p. 4 USAID). These cartels are high
powered political and business officials using Ukraineʼs poorly structured economic
system to their advantage. The cartels possess so much economic power over Ukraine
that at times the shadow economy as accounted for more than 50% of Ukraineʼs Gross
Domestic Product (p. 4 Hughes). The shadow economy does more than just make the
elite more powerful; it also creates a closed insider economy (p. 4 USAID). This means
that Ukraineʼs economy is unable to fully participate on a world wide level because
The causes of such an economy are varied; however there are some
contributing factors that allow Ukraine to remain so entrenched in the shadow economy.
extremely convoluted, inaccessible to many businesses and far too costly for many
corporations to use (p. 354 Canadian Scholars). Restructuring this system has been
attempted many times with little if any success, mostly due to parliamentʼs refusal to
implement new tax laws when they are created (pp. 72-73 Kravchuk). Without proper
tax laws in place, the average corporation does not possess the ability to make money
officials (pp. 6-8 Neutze et al.). In order to stop the growth of the shadow economy more
opportunity must be created and Ukrainians must hold elected officials to higher
standards, or to any standards for that matter. Many people are drawn into the shadow
failing industry and few legitimate work opportunities (p. 4 Hughes). Through education,
true economic growth and social reform, the shadow economy can be eliminated. Even
with social movements such as the Orange Revolution attempting to address corruption,
must be corrected.
Beyond the shadow economy, there are many other threats to Ukraine's
economic future; the most dangerous of these being disease. Currently disease is out
of control in the Ukraine. Among those diseases HIV/AIDS is the most serious, by 2016
AIDS could claim as many as 2.1 million Ukrainians; besides the lives lost, by 2010 HIV/
AIDS could consume one half of the Ministry of Health's budget (Meier). Adding to the
the Ukraine. Due to the stress, the already weak economy could decrease by an
additional 1% per year (Meier). Along with the health issues facing Ukraine immigration
is still depleting workforces and weakening the economy further. The continued loss of
human capitol to both disease and immigration will have a dramatic impact on the
Ukraine within the next few years. Along with disease and immigration the current
economic climate has caused another set back for Ukraine. Ukraine's Gross Domestic
Product is projected to shrink by 9% and the hryvniaʼs value to drop by 38% (BBC
Once the figure for Ukrainian democracy and progress, opinions about Yushchenko
have begun to change. Yushchenko lost validity and trust by making radical changes in
the government, such as dissolving the parliament and the cabinet (Kramer). He has
also failed miserably to take on the ever present shadow economy and has even been
fighting allegations of corruption within his own officials (Meier & p. iv USAID).
liberal democracy which fought to see him as president, and turned it into an illiberal
democracy. Only time will tell if the Ukraineʼs democracy and economy will be able to
withstand yet another far reaching leader, grasping for more power.
From the collapse of the USSR up to the current president, it is clear that the
economy. The extreme ups and downs, paired with a failing parliament and poor
available to the country it still remains to be seen how the Ukraine can balance the new
turbulence they have hit. Hopefully though, the same people who protested during the
Arvedlund, Erin E. "Ukraine's Rifts Extend to the Economy." New York Times
625-51.
Kravchuk, Robert S. Ukrainian Political Economy The First Ten Years. New
revolution>.
in Ukraine. Rep. Washington D.C.: The Atlantic Council of the United States,
2007.
sum fame' or not? Publication. Vol. N68. Paris: The European Union Institute
"Ukraine's economy 'to shrink 9%'" BBC News 7 Apr. 2009. 22 Apr. 2009
<http//news.bbc.co.uk/go/pr/fr/-/2/hi/business/7988196.stm>.