Future of Reforms through the Lens of Campaign Promises

Now when Ukraine is at the finish line before the 2014 Extraordinary Parliamentary Elections on October 26 it is not too late to reflect on the programs of the major political parties that are all determined to “purify” the Verkhovna Rada (Ukraine’s parliament) of the disciples of the previous regime, “reset” the Ukrainian political system, and provide impetus to economic and political reforms that the participants of the Euromaidan or the Revolution of Dignity fought for and the most of Ukrainians strive for.

One should not be naïve and hope that all the promises and claims in these documents would be fulfilled. Still, the programs of the contesting parties could give an idea what issues today’s Ukraine is concerned about and how solid, consistent, and reform-oriented the future policymaking could be. After all, the forces that would make it into the parliament will shape the policies which could at last kick-start the long-awaited in Ukraine and abroad transformation of the country to a thriving emerging market economy after two (lost?) decades of hopes and disappointment. This becomes especially important if Ukraine continues with the constitution reform shifting the power from the President to the parliament and to the regions.

The idea of this post is not to compare the programs but to guess what policies are likely to be pursued by the new parliament (see a companion posts here and here on detailed comparison of the programs).  For that, the author would highlight and evaluate those proposals in the programs which, in his opinion, are conducive to the goal of reforms, paying particular attention to economic measures. The readers and, hopefully, the parties themselves would also be warned about the key risks to the reform process that could materialize should the parties act on those negative parts of their campaign documents.

The programs of the following parties will be assessed from in terms of specificity, feasibility, economic soundness, and consistency/coherence (in alphabetical order): Batkyvshschyna (Motherland), Civil Position (CP), Communist party of Ukraine (CPU), Radical Party (RP), Opposition Block (OP), Poroshenko Block (BPP), People’s Front (PF), Samopomich (Self-help), and Strong Ukraine (SU).

The text of the programs can be accessed by following the links at the Ukrainian party names.

Batkyvshschyna (Політична партія Всеукраїнське об’єднання “Батьківщина”)

The strongest points of the program are the anti-corruption measures, the proposals for reforms of the judicial system, and the measures to facilitate political checks and balances. Specifically, the party proposes the concrete mechanisms to operationalize the proposed Anti-corruption Bureau (insure its independence, the right to provoke to bribe, etc.) and explicitly pledges to force the public officials to publish the incomes and spending on the Internet and drastically increase the criminal prosecution for corruption of public officials. Only Batkyvshchyna talks about an alternative to the omni-present drive for lustration of public officials: the system “private prosecution” giving every private citizen the right to directly prosecute the corrupt public officials in courts which is reminiscent to the qui tam writs in many democracies (see the article on this blog about this).

The party is very correct that anti-corruption measures would be effective only if accompanied by the adequate judicial reform. Luckily, it proposes sound and achievable reforms of the judicial system, including the jury trials, public control over courts, and local courts elected by the citizens. The clear positives of the program are also the system of “people’s control” in the government bodies (by means of and independent supervisory council at each government body, consisting of the members of civil society and equipped by a veto rights) and improvements in the system of checks and balances such as calling off of the deputies, impeachment of the President, and local self-governance.

Batkyvshschyna is a clear proponent of pro-European and pro-NATO direction in foreign policy which earns the program a high score in terms of clarity of political ideology. The declared need to adopt European practice in many aspects of the economic and political life, visa-free travel to the European Union (EU), unconditional Association Agreement and eventual full membership in EU, and the proposals for co-operation with the EU in common defense are the good ways to “transplant” democratic institutions to Ukraine.  Consistent with this pro-European ideology are proposed drastic reduction of the tax burden, licenses, and the controlling bodies for businesses in the economic part of the program. One can guess that the proposed “business ombudsman” would be the institution to defend the rights of the small and medium businesses, even though this is not clearly specified.

Against this background the program is full of pre-election populism which might make it less appealing to the moderate electorate. Among the weakest points are unrealistic measures on establishing the peace in the East: given the dynamics of the conflict from late summer it is highly implausible that Ukraine can “force” Russia to back down or compensate anything. The only sensible part here is the proposal to establish the centralized Office of the Commander-in-Chief (Ставкa Верховного Головнокомандувача) to streamline and consolidate the management of the military effort.

The economic part of the Program is weak, with very few details. What is the role of business-ombudsman? It is unclear, for example, what strategy of economic development the party sees for the post-war reconstruction and subsequent economic development. However, this should be the basis for all the salary increases (for government officials, veterans of ATO, etc.) the party promises.

Civil Position (Політична партія “Громадянська позиція (Анатолій Гриценко)”)

Overall the CP’s program is rather abstract and vague.

The strongest points of the program include the proposals related to public security and defense, perhaps, given the background of the party leader. In that, the program is consistent with a clear pro-European and pro-NATO direction as the way to protect citizens and the country. The proposals for three-layer defense system and the system of civil defense for the case of natural/technogenic disaster are interesting fresh ideas which Ukraine might consider given its geopolitical position. Similarly to Batkyvshchyna, the anti-corruption measures (part II. Justice) include the explicit pledge to drastically increase the criminal prosecution for corruption of public officials and judges and to improve the government transparency by giving to the public access to information about government spending and financing of political parties. These measures are correct and urgent because up until now the prosecution of corrupt public officials is non-existent in Ukraine.

The proposed measures of decentralization of the government and entrepreneurship/investment activity (part III. RENEWAL) are consistent with those of other liberal Ukrainian parties and overall consistent with the principles of free markets. There seems to be consensus regarding the need to give larger powers to local communities (“hromadas”) while limiting the economic role of the central government to oversight, control and economy-wide programs. As others, CP proposes to limit the number of controlling bodies and government officials, deregulate the entrepreneurship and protect businesses from unjustified fines and harassment by the state.

While the program does not have drastic inconsistencies with the main chosen ideology the key drawback is the lack of specific mechanisms which makes one wonder about credibility. For example, the lion’s share of the part I. Security lacks of concrete mechanisms of implementation and contains populist elements. It is unclear how the energy security is going to be achieved. The part about the facilitating entrepreneurship and property rights lacks mechanisms. And the pledge to fight oligarchs is plainly a cheap talk. Many items of the program are conceptually misplaced which makes the document look inconsistent. Crucially, the program seemingly lacks the dedicated economic part. Some measures related to economics are scattered throughout the document.

Communist Party of Ukraine (Комуністична партія України)

CPU’s program is perhaps the most specific of the all the programs I read. The party’s program is very consistent with their traditional leftist rhetoric and measures. Still, some elements of the program are useful to pay attention to.

I find quite appealing the pledge to promote the spiritual unity of the nation by means of the accommodating language policies and cultural self-determination, while giving the Russian language the status of the official language nationwide is probably not justifiable. True that Ukraine should continue to implement measures to achieve the piece in the Eastern region; however, a number of parties try to make it to the Parliament using the tough rhetoric and the “military solution” which might be simply non-feasible in the near term and dangerous in the longer prospective. Such language can saw the dangerous seeds of long-lasting hatred on the national grounds which would take a generation to alleviate. In contrast, the CPU is explicit about the need to de-militarize the consciousness of the citizens and reduce the hatred and aggression. All this might be hard to achieve in the time of direct military hostilities but the author of this post is hopeful that the new Rada would support the beginning of national reconciliation. Against this background, Communists are explicit about the principles of territorial integrity of Ukraine as the precondition for the larger independence of the regions in possible revised constitution.

Another proposal relates to a broader use of direct citizen’s involvement into the key decisions of the state through citizens plebiscites. Though, with effectively functioning parliament such mechanism of governance would likely to be used in exceptional circumstances.

The economic part II does contains some interesting measures, which are also feasible or advisable given the realities of Ukraine. Given the history of abuses and fraudulent schemes the proposals of the state control over natural resources or the ban on sale of agricultural land are probably justifiable. The efficiency concerns should always be kept in mind when it comes down to state control of companies/industries. In the longer term the transparent privatization of the companies in natural resource sector should boost the efficiency and bring necessary investment. This process should be accompanied by drastic anti-corruption reforms many parties are pledging.

A number of social goals voiced by CPU should be perceived as a more medium to long-term targets because in the near term they are simply non-feasible. Still, the measures such as determining the salary of the budget workers by the average level of the given industry, state control of the quality (but not the prices!) of the food and drugs, free pre-school, school and professional education, support of young teachers and doctors, investments into the system of cultural and spots facilities, and promotion of public health are the elements of social safety net Ukraine should strive for once the economic reforms bear first fruits in terms of economic growth and prosperity.

A lot of proposals regarding tax policy, such as no income tax on low incomes and the progressive taxation on the larger incomes, match the current European practice but are more questionable in case of Ukraine with its need to promote free enterprise and entrepreneurship. The super-rich should be taxed (of course the mechanism of enforcement of the tax collection should be transparent and enforced).

As said, many parts of CPU’s program have the elements of typical communist rhetoric which are incompatible with economic theory, experience of more successful former non-market economies, and the realities of today’s Ukraine. It is worth mentioning a few points which are especially acute because similar measures are seen—often in a more convoluted form—in program of other less extreme parties.

In the political block, the call for the pan-Slavic unity against NATO’s conspiracy (part I) or support of traditional religious confessions (part II) sound like 19th century propaganda. Of course, the normalization of the relationship with Russia and continuation of close ties with Belarus and Kazakhstan should be on the agenda. But these relationships should be developed on the basis of mutual respect of cultural identity and the right on own path. Despite being specific—which would might make it appealing for some electorate which is pragmatic but not economics-savvy— some economic measures, such as those calling for nationalization of strategic industries, state support of domestic producers, or state control of prices, do not rely on feasible economic foundations and discredited themselves judging from the experience of successful emerging markets.

The Radical Party (Радикальна Партія Олега Ляшка)

Overall the program is very populist. One gets an impression that the program excessively focuses on the “hot issues” discussed in the press (witch hunt on separatist government officials, corrupt policemen, oligarchs, etc.) as opposed to longer term strategy of “radical” reforms as the name of the party implies and the slogans in the end of the program imply.

The party seems to target the grassroots electorate including in the countryside. Probably that’s why the most thought through measures relate to agricultural reforms (“Без села – не буде України”), in particular, the ban on sale of agricultural land (“to prevent abuses”) to be replaced by the lease of land.  Incidentally, Batkyvshchyna, which probably is close to the RP by place in the political spectrum, only offers the outright ban of the sale of land without being as constructive on the ways to promote entrepreneurship in the agriculture. However, the system proposed by the RP does not seem consistent with the ban for foreigners to “control our black earth.” After all what Ukraine need is the system of efficient farms and agribusinesses and foreign investment in this area would be useful.

The author of this post finds justifiable some proposed social measures (in part “Людям – захист, добробут, майбутнє”), such as targeted support to the poor and families with at least two children, introducing local village nurse-midwife posts, legalizing the Ukrainian guest workers (essentially this recognizes the reality of the life when a growing part of foreign currency inflows to Ukraine comes from guest workers).

Some elements of anti-corruption measures, such as right to provoke to bribe and the system of control of the spending by the government officials, are not original to RP but luckily included in the program. However, these measures are not very specific, as compared to similar measures proposed by Batkyvshchyna.

In contrast to these, the other anti-corruption measures, such as creation of the “public anti-corruption corps” out of former veterans of anti-terrorist operation to “react on complains by citizens” sounds plain dangerous—the enforcement of the anticorruption measures should be implemented by the appropriate state enforcement bodies following the court decision and not by the paramilitary units of questionable legitimacy. The above mentioned system of “private prosecution” or the qui tam writs proposed by Batkyvshchyna could be a middle ground. Either way, the judicial system should be reformed but there is little (nothing) on this in the program of RP. The only parts on changes in government are the suggestion to “completely replace the law enforcement” and implement “full lustration” of officials, no details are given.

The economic block of RP (except for the agricultural/countryside development mentioned as a positive) is totally incoherent and is in odds with the aim to promote entrepreneurship and respect of property rights. Measures such as forcing oligarchs to pay for “penny privatization” of enterprises and crisis tax on oligarchs, the right for local communities (hromadas) to control land, buildings and equipment (?), and default on 75% of external debt would trigger the outflow of capital from Uktraine, harm investment and business climate, and kill the entrepreneurship in the cradle. These proposed measures are also inconsistent with a sensible pro-business proposal to simplify business reporting and minimize checks by various government bodies.

The Opposition Block (Політична партія “Опозиційний блок”)

Given the growth of outright populist parties in Ukrainian politics with unjustified drastic measures some elements of this program are worthwhile. However, Ukraine should not cease the opportunity for reforms brought by the 2014 Revolution. Unfortunately a large part of OB’s program tries to salvage the system of state-oligarchic dominance which Ukraine experienced in the last decade of her development.

Within the part “Peace” (“МИР”) the OP, as CP does, proposes to start the inclusive national dialogue as the only option to establish the peace and to investigate the mass killings of the civil population.  The author of this post supports the idea to engage all the parties who are credibly willing to negotiate under condition of territorial integrity of Ukraine. However the rest of proposals in this part are defeatist and directly admit the supremacy of Russia in regional geopolitics by calling for the “negotiation with Russia” under intermediation of the U.S., EU, and other countries as the means of bringing the peace in the East. It is also unclear what will be the source of money for the program of modernization of Army, which would promote the Ukrainian defense industry, as described in the end of this part.

The political part of the program (“СТАБІЛЬНІСТЬ”) is well spelled out while not as reform-minded as Ukraine should have now: the country needs drastic reforms and not “stability” of the sort of the recent years. Having said this, one can see a number of sensible proposals in this part.  For example, as other parties, the OB proposes to give a larger role to local communities (hromadas). The National Plan for Rebuilding of Donbass is a god idea if based on market mechanisms. This approach is overall consistent with proclaimed (in the beginning of the economic part “ВІДРОДЖЕННЯ”) need for improvements of investment climate, attracting FDI, and job creation.

The author of this post is sympathetic to a more careful approach to “old government bureaucracy” than what is often offered by the radical parties (e.g., “complete lustration,” etc.).  The issue with the “total lustration” is there are no readily available professionals who would be available to replace the existing bureaucrats given the state of education and the brain drain from Ukraine. One should always hope for the best, but the existing candidates either discredited themselves by earlier collaboration with previous regimes of Yanukovich and Yuschenko or, if they are recruited from pro-Western think tanks, universities, business community or from the Ukrainians abroad, simply need time to acquire the experience of running the state. The bottom line is, it takes some time to replace the current government employees by more professional “technocratic” government. Still, the process should be commenced and credibly implemented. Again, the system of “private prosecution” should be seriously considered by the forthcoming Verkhovna Rada. However, the fact that the proposed reforms of law enforcement and judicial system have declarative nature and not substantiated casts doubt about overall commitment of OP to change the existing status quo.

The other positive features include such social issues as the inclusive language policy by which Uktranian is the only state language while the local communities have the right to define the status of other languages (so called “regional languages”), the implementation of medical insurance, free medical services for the poor, the measures of youth development, and support of young families through grants on the birth of children or cheap credits for housing.

The economic part “ВІДРОДЖЕННЯ” is well spelled out but except for the proposed lower tax and regulatory pressure on small and medium business and the above social measures offers economically unsound or outright disastrous proposals such as the state support of national producers and foreign exchange policy tasked with exchange rate stability. The policy of keeping inflation under control is much more sensible while it is not clear where the ceiling rate of 5% comes from and how the party proposes to control inflation—there is no explicit proposal of inflation targeting monetary policy by the National Bank of Ukraine (NBU), supported by its larger independence. If anything, the proposal of predictable exchange rate is in odds with the NBU independence. Proposed credit and tax holidays for the businesses in the areas affected by the war are, at the first glance, justifiable—such enterprises should rebuild and quickly satisfy the needs of the war-ravaged region. However, there could be ample scope for excesses and fraud from those who have nothing to do with providing services to the affected regions. A better option is to provide low corporate taxes for all Ukrainian businesses, and very low or no taxes for start-ups and small businesses. With ensuing economic growth the regions would benefit from investment and/or development programs anyway. In the short-run the bi(multi)lateral foreign aid and development assistance might be the source of funding for the immediate needs of people and infrastructure there.

The Petro Poroshenko’s Block (Партія “Блок Петра Порошенка”)

Overall, the BPP’s program is a good balance between the reform drive and civilized fashion of their implementation which could be appealing to the middle class, entrepreneurs, and more moderate parts of electorate. In addition, the program is sincere and does not promise great results without hard work and sacrifice by everyone in the country. However, a number of measures have a declarative nature and the program is a bit incoherent.

The author of this post supports the political part “Жити вільно”. The measures there are sound and specific, without “chopping with ax”. For example, the government bodies which lost the trust of public are re-elected early and not lustrated without discrimination, even though, somewhat inconsistently, the lustration of government bodies is mentioned in part “Жити чесно!” Perhaps BPP hedges by including the lustration rhetoric to appeal to more radical voters.

BPP reconfirms the commitment to reduce the presidential powers through streamlining the parliamentary-presidential system where the parliament coalition would have the right to form the Cabinet. How this is implemented remains to be seen. The practical measures to insure strengthening of the system of checks and balances include, among other things, the explicit pledge to raise the transparency of the government through civic, legal and political mechanisms of control, competitive and independent media, public control over courts and their larger autonomy/independence from other branches of power (judicial reform is discussed in part “Жити чесно!”). As a number of close competitors the party pledges to decentralize by giving more powers to local hromadas. BPP sees these administrative reforms supported by the development of the pool of professional government officials who would bear responsibility to the public in exchange for social guarantees. However, this gradual process (as I describe above under the Opposition Block) is absolutely incoherent with the promise of outright lustration of all the branches of power.

Interestingly, the economic program in part “Жити в достатку!“ not only advocates reduction of tax pressure, lower tax rates, fighting of tax evasion, simplified taxation of small and medium business but also stresses the need to change the people’s attitude to entrepreneurship to the positive one. This is a good initiative because even now the successful entrepreneur or businessmen who earned his or her fortune by taking initiative and calculated risk is not perceived as a role model by the Ukrainian society at large.

Overall, one could give the BPP’s program thumbs up if not a number of drawbacks besides the lack of clear structure. The reforms of the law enforcement and judicial system are crucially important in the list of measures to ensure a more balanced division of power. However BPP provides very few details on these reforms in economic part “Жити в достатку!” (It is not clear why this is not mentioned in the political part of the program “Жити вільно”).

Perhaps the biggest disappointment is some features in economic part. While the free market economy is named as the goal of development the program is explicit in specifying the priority industries (agriculture, high tech) and promises to support agricultural exports. This interventionist role of government is typically distortionary, expensive, and counter-productive. Market discipline is the best promoter of exporters and producers.

The part “Жити безпечно!” contains a contradiction between the proposal of political/diplomatic means to return the annexed Crimea and occupied Donbass territories and the argument in favor of self-reliance in the matters of defense. The latter seems dangerously naïve given that the previous military and bilateral and multilateral diplomatic efforts have at best a limited success. At the same time, the proclaimed better financing and modernization of army by the domestic defense industry only seems even more naïve given the state of the government budget and economy.

Samopomich (Політична партія “Об’єднання “САМОПОМІЧ”)

Samopomich brings relatively new faces to Ukrainian political arena. Hence, the party could potentially win some voters who grew disillusioned by the “same old faces dressed in new clothes” and revanchists from previous political forces. Unfortunately the program is disappointing. It looks like a very long itemized list of what we would “like to have” and very few details on “how we are going to do this.”

The political and social parts of the program are well-developed and sensible. The party seems to be realistic about inability of Ukraine to defend herself (and, hence, proposes to dismiss the political/military neutrality and form the military reserve from the wide population) or limited ability of Ukrainian defense industry to satisfy the needs of the army by itself (hence, the proposal to produce and purchase the arms abroad).

The economic measures in part “National economic pragmatism” (“політикa Національного економічного прагматизму”) are well spelled-out. The academic research and practice show that the measures aimed at the development of the “new economy” and entrepreneurship—such as the technology and business parks, export-crediting agency, development bank, etc., support of fundamental research, and development of modern infrastructure—are conducive to long-run economic growth. By the same token development and modernization of the countryside, including green agriculture, sounds almost romantic. One can fully support the social program of this party under the “ДОПОМАГАТИ ТИМ, ХТО ПОТРЕБУЄ”. Still noting is told about how these nice measures would be paid for. One option would be foreign investment. Let us see if the program is fully consistent with what foreign investors care about: property rights protection, control of corruption,

It is not.  On the surface the program lists a number of positive measures aimed at the reform of government by through transparency of government purchases and property sale; decentralization and a larger role of local communities (hromadas); streamlining of administrative services for people and businesses; appointment of judges independently of President and Parliament, their larger independence and responsibility; larger responsibility of law enforcement officers but also reducing their number and increasing salary. Samopomich thinks that these reforms and overall workings of government must be accompanies by an active state information policy. Unfortunately, the party is not very specific on how they plan to achieve those goals. The similar empty promises include absence of details on the anticorruption office except for the need to create one and the pledge that the police will “transferred from the punitive body to the one of public safety.”

Crucially some economic measures are in odds with free market principles and are counterproductive. Specifically, Samopomich promises to guarantee the affordability of financing (who will guarantee that?), ensure active state promotion of competition in global markets and foreign investments (is the state best equipped to do so?), follow the policy of import substitution, and support  some priority sectors.

The People’s Front (Політична партія “НАРОДНИЙ ФРОНТ”)

Overall the program is most appealing to the author of this post as far as the strategy of economic development and political reforms (the readers are invited to read the text of the program for details). Still there are some parts which would need to be more concrete, especially the reform of law enforcement, judicial and tax system.

One can especially praise the PF’s anti-corruption policy which is presented as a coherent group of measures, including checks on the Anticorruption Authority itself and explicit commitment to freedom of press. The decentralization of power through a larger role to local communities (hromadas), the key role of small and medium businesses for economic development, and freedom of entrepreneurship by means of lower administrative influence of the state on economic activity are the items that FP shares with a number of other parties.  Still, by combining them with the other measures in their program the PF offers the most promising reform agenda among all political parties.

Despite leaving the overall very positive impression the PF (and the voters) should be warned about a few elements which are clear low points.

While the role of local communities is put to the extreme (the hromadas are named “the key element of the entire system of the state”) and the anti-corruption measures are very detailed, the mere one line is devoted to the reform of law enforcement and national security and judicial and tax reforms. Despite proclaimed reduction of administrative influence on economy the priority to agriculture and food processing sectors of economy is retained. Finally, too much is promised to war veterans and the poor; this sounds like a cheap talk and unrealistic campaign promises and undermines the credibility of the PF

Strong Ukraine (Партія Сергія Тігіпка “Сильна Україна”)

The program of SU earns a high grade in terms of clarity and detail. The key issue in the program is a large inconsistency in proposed economic policies. The program contains the opposite in their spirit measures of the “economic patriotism” (essentially, government support of domestic industries and import-substitution development) and the pledge to support the “economic freedom and improvements of the investment climate.” This is problematic on its own because the former is not a vital reform strategy in the modern world. The inconsistency might bring a large cost to the SU itself (in terms of a number of lost votes) because the program in its form does not have a clear audience: the proponents of free markets would be disappointed by the large role of government while the voters who are attracted by populist slogans find the program too moderate (no lustration of power is proposed, for example). I let the readers judge by themselves by highlighting the positive and negative features of Mr. Tigipko’s program.

The argument for inclusive peace negotiations reflects the reality of the conflict at the East where the solution by the direct confrontation/military means seems less feasible.  Still, the party does not question the principles of Ukraine’s independence, territorial unity and sovereignty in the process of conflict resolution.

As many other parties this party proclaims the support of political decentralization. In contrast to others, they offer a specific and quite detailed decentralization plan. Among other things, the role of President’s Representatives is clearly defined. The suggested limited role of these bodies of executive power is very consistent with the plan of current Administration (and the Presidential party BPP) to move toward parliamentary-presidential model with greater power given to Rada. The proposed anti-corruption measures are clearly defined and include the proposals to reduce the number of the controlling bodies and officials, eliminate discriminatory/punitive tax policies, and give more oversight powers to the civil society. All these are present are not very distant from the programs of other more centrist parties.

If evaluated independently from the rest of the program, the measures under “economic freedom and improvements of the investment climate” (under Ch 2 “ВІДРОДЖЕННЯ ПРОМИСЛОВОСТІ”) and preferential credits to small and medium enterprises (Ch 3 “СОЦІАЛЬНИЙ ПОРЯТУНОК”) are sound, even though it is hard to see the background for some numbers such as the size of the targeted credit to small businesses up to 1% of GDP. Finally, the active monitoring of the social standards of living (quarterly review of the cost of living, wages, etc., under the Ch 3 “СОЦІАЛЬНИЙ ПОРЯТУНОК”) is a good initiative if used for the purposes of monitoring and not direct interference by the government.

At the same time the program contains as many negative/weak points as it does positive ones.

The suggested extent of the economic autonomy of local communities (hromadas) is way too extreme. It is not specified what part of tax proceeds and what kind of taxes would be controlled by the central government to be able to support the state budget when hromadas will control the “largest share of locally generated tax collections.”

The key pillars of the economic block (part “2. ВІДРОДЖЕННЯ ПРОМИСЛОВОСТІ ТА ЕКОНОМІЧНИЙ ПАТРІОТИЗМ”), proposing for the State to “actively protect and support the development of domestic industries” and offering a detailed list of measures behind the policy of “economic patriotism”, are very alarming from the point of view of free market economy driven by the principles of competition and free enterprise where the role of the state is limited to creating the equal level-play filed for all industries and parties and protecting the property rights and contract enforcement.  Similarly, the claim to guarantee the state orders to the Ukrainian businesses (under part “3.СОЦІАЛЬНИЙ ПОРЯТУНОК”) is rather a non-market measure. Besides, the policy of the “economic patriotism” is quite inconsistent with the sheer budget autonomy at the local level. Finally, the proposed managing of the exchange rate of Hryvnia by the “active regulatory policy” of the National Bank of Ukraine is, again, in odds with freely functioning financial markets and the independent central bank.

Summary

As my colleagues mentioned on this blog here and here, the Ukrainians have many options to choose from. Whatever principles Ukrainians use to decide on the favorite party the hope is they would consider such criteria as the level of detail, feasibility, economic soundness, and consistency/coherence of the campaign documents and not vote exclusively for personalities or in exchange for cash/food baskets.

Judging from the common traits in many programs we can hope for the following positive measures.

1. The attempts to crack down on corruption. This reform—if accompanied by the judicial reform, introducing checks and balances that separate powers among legislative, executive, and judicial power, competition and freedom of press and media, freedom of speech, larger involvement of the population at large into governance (let it be through the system of “private prosecution”, citizen’s control of the government, or some other mechanisms)—would make Ukraine an attractive place to invest in and create the preconditions for economic growth.

2. The support of “cleansing the current government” by means of lustration is somewhat questionable practice (as described in this article) but the threat of lustration might force the officials to have the second thoughts about taking a bribe. Batkyvshchyna’s should put their proposal related to the system “private prosecution” on the agenda in the future Rada.

3. We shall see some initiatives related to decentralization of central power. The local hromadas will receive some political and economic means to influence the local decision making. It remains to be seen how this would work and whether at to what extent the center share the power and resources with the local communities and the regions. The issue of federalization is not likely to be raised because every party proclaims the principles of integrity and territorial unity of Ukraine.

4. The Ukrainian politicians seem to come to realization that small and medium businesses and entrepreneurship have a positive influence on the economy. None of the programs says why but the known channels are through new jobs, flexibility and innovation, and boosting competition. Some forces raise the need to change the overall mentality of Ukrainans toward more positive attitude to entrepreneurs and businesses. We may see further reduction of tax and regulatory burden on the small businesses.

5. All the parties recognize the need to establish the peace in the East as a precondition for reforms. Of course Ukraine should start reforms immediately and simultaneously with the measures aimed at conflict resolution. The approaches for the latter vary from direct negotiations with Russia to political and diplomatic means to “forcing the aggressor” out through own sanctions and international courts. Whatever measures would be tried, we may expect more attention paid to the national defense and army and the continuation of political dialogue as to the geopolitical orientation of the country, including possible NATO membership.

6. Most likely Ukraine will take steps in the direction of closer integration with the European Union. This could bring not only economic benefits (such as access to a larger market for exporters and to investment funds for all businesses; competitive pressure on Ukrainian businesses from abroad; job creation by incoming foreign companies opening the production in Ukraine) but also changes in political and economic institutions of the country. The experience of the newer EU members and Turkey shows that the commitment to the EU membership provides an extra incentive to enforce contracts, respect property rights, fight corruption, and pursue sound economic policies. The challenge here is not to resort to “protecting the domestic producers” while hoping that the Europeans would not do the same but to embrace the European values of frugality, hard work, free enterprise, and respect of human rights and diversity.

It is unfortunately hard for the parties to completely break away from the past, recognize and dismiss the measures which did not work in Ukraine or abroad, or not to make promises that are hard to deliver on. These negatives, present in every single program reviewed here, are the risks to a new chance Ukraine has now.

1. In the majority of cases the judicial reform and the reform of law enforcement bodies, which must accompany or even be the basis of the anti-corruption campaign, are not prominently featured in the programs. This creates a risk for the whole reform process to stall because the vital system of checks and balances is impossible without the independent judiciary and the law enforcement system which “serves and protects” the citizens.

2. As far as fight with corruption is concerned, there is a risk to throw the baby out with the bath water when it comes down to the “full and outright lustration” of public servants. The author got the impression that the parties take this measure too literally and do not see the costs of the measure when implemented “across the board.” The reasons for the pledges of complete lustration are understandable given that the society is fed up with the status quo and the rampant corruption of the public officials. However, the politicians need to think hard what needs to be done to create the “new breed” of the professional government officials, let it be the better social protection, education, raising the prestige of the profession, luring the Ukrainian specialists from abroad, etc. They should have no illusions that this process is gradual and absolutely incoherent with the promise of outright lustration of all the branches of power overnight.

3. As far as economics goes, the biggest risk present in many programs, including those of the leaders in pre-election polls, is the desire to create the “priority industries” supported by the government (now they are agriculture, food processing, high tech, defense; not long ago it was metallurgy and chemicals).  Many programs advocate the government support of exporters and some argue for import-substitution. Why? Such measures are nothing more than the leftovers of the oligarchic capitalism Ukraine seen developed since its independence in 1991. The fledgling small and medium businesses, which parties rightly see as the driver of development, will have no chance against the “national champions” supported by the government. The international experience shows that such interventionist role of government is typically distortionary, expensive, and counter-productive while market discipline is the best promoter of exporters and producers. Instead, the politicians should pay attention to creating the institutions which protect property rights, contract enforcement, and equal level playing field for companies of any industry, size, ownership or nationality.