WhatWhat typetype ofof capitalismcapitalism inin ?Ukraine?

Vlad Mykhnenko International Policy Fellow, CEU & Open Society Institute Ph.D. Candidate, Faculty of Social and Political Sciences, University of Cambridge E-mail: [email protected] Paper presentation, 13th Annual Managing the Economic Transition Research Workshop, Jean Monnet Centre for Excellence, University of Cambridge, UK (12 March 2004) KeyKey conceptsconcepts forfor aa ‘‘varietyvariety ofof capitalismcapitalism’’ analysisanalysis

! The French Régulation School and comparative political economy approaches: the capitalist mode of development = RoA + MoR → outcomes a) Regime of Accumulation = a production system with a specific technological style: - extensive - intensive (Fordism) - super-intensive? (post-Fordism / ‘new economy’) b) Mode of Regulation = a set of institutional forms (‘structural mediations’) to guide and stabilise the accumulation process, i.e. to promote coherence of capitalism - competitive mode→ laissez-faire capitalism, 1800s-1930s - monopolistic mode→ ‘organised’ (co-operative corporate) capitalism, 1940s-1970s - neo-liberal mode → ‘disorganised’ capitalism, 1980s – present c) performance = economic development + social progress (‘long waves upswing v. long waves downswing’) ProblematicProblematic issuesissues

! TheThe dichotomydichotomy ofof ‘‘organisedorganised’’ && ‘‘disorganiseddisorganised’’ capitalismscapitalisms v.v. thethe ‘‘diversitydiversity ofof capitalismcapitalism’’ approachapproach (German,(German, AngloAnglo--American,American, Scandinavian,Scandinavian, Japanese,Japanese, etc.)etc.) ! MethodologyMethodology forfor studyingstudying thethe mostmost advancedadvanced WesternWestern societiessocieties (G(G--7;7; highhigh--incomeincome OECD)OECD) ! TraditionalTraditional v.v. postpost--communistcommunist typestypes ofof capitalismcapitalism (e.g.(e.g. ‘‘oligarchicoligarchic’’ // ‘‘hybridhybrid’’ // ‘‘mutantmutant’’)) TheThe postpost--communistcommunist transformationtransformation ofof thethe UkrainianUkrainian politicalpolitical economyeconomy

IssuesIssues toto bebe addressed:addressed: ! PerformancePerformance underunder postpost--communism:communism: economiceconomic growthgrowth andand socialsocial progressprogress ! InstrumentsInstruments ofof controlcontrol andand regulationregulation ! WhatWhat typetype ofof capitalismcapitalism forfor Ukraine?Ukraine? Ukraine's post-communist economic trajectory 105 100 95 90 0

0 85 1 80 990 = 1

, 75 x e d 70 65 me in u l o 60 V 55 50

45 40 19909192939495969798992000010203 GDP Industrial output Agricultural output Electricity consumption Ukraine's annual growth patterns 20%

15%

10%

5%

h 0% t w o r g

l -5% nnua

A -10%

-15%

-20%

-25%

-30% 1991 92 93 94 95 96 97 98 99 2000 01 02 03 GDP Industrial output TwoTwo stagesstages ofof UkraineUkraine’’ss postpost-- communistcommunist transformationtransformation

I. Decline:Decline: 19901990 –– 19961996 II. Recovery:Recovery: 19971997 –– presentpresent " TwoTwo transformationtransformation phasesphases ↔↔ twotwo differentdifferent modesmodes ofof regulationregulation I. ‘‘ChaoticChaotic capitalismcapitalism’’ (Lane(Lane 1999;1999; 2000)2000) →→ UkraineUkraine’’ss GreatGreat PostPost--CommunistCommunist DepressionDepression II. ‘‘CombineCombine capitalismcapitalism’’ (=(= statestate--initiatedinitiated conglomerateconglomerate--propelled)propelled) →→ economiceconomic recoveryrecovery andand growth;growth; andand socialsocial progress?progress? WhatWhat isis aa ‘‘chaoticchaotic capitalismcapitalism’’??

! ““AA chaoticchaotic socialsocial formationformation maymay bebe defineddefined asas aa socialsocial andand economiceconomic systemsystem whichwhich lackslacks institutionalinstitutional coordinationcoordination andand promotespromotes socialsocial fragmentation:fragmentation: goals,goals, law,law, governinggoverning institutionsinstitutions andand economiceconomic lifelife lacklack cohesion.cohesion. ItsIts characteristicscharacteristics areare uncertaintyuncertainty aboutabout thethe future,future, eliteelite disunity,disunity, thethe absenceabsence ofof aa dominantdominant andand mediatingmediating classclass system,system, aa mixturemixture ofof mediamedia ofof exchange,exchange, criminalisationcriminalisation andand corruption,corruption, rentrent--seekingseeking entrepreneurs,entrepreneurs, inadequateinadequate interestinterest articulationarticulation andand anan economyeconomy inin declinedecline characterisedcharacterised byby inflation,inflation, unemploymentunemployment andand poverty.poverty. WhereasWhereas ‘‘disorganiseddisorganised capitalismcapitalism’’ doesdoes notnot leadlead toto breakdown,breakdown, aa chaoticchaotic socialsocial formationformation isis perverseperverse andand systemsystem isis precariousprecarious”” (Lane(Lane 2000:2000: 497497--98).98). UkraineUkraine’’ss postpost--communistcommunist modesmodes ofof regulation:regulation: fromfrom ‘‘chaoticchaotic’’ toto ‘‘combinecombine’’

! MoRMoR spheresspheres ofof guidanceguidance andand stabilisation:stabilisation: a) thethe rolerole ofof thethe statestate anandd formform ofof statestate economiceconomic managementmanagement b) thethe formform ofof capitalcapital –– labourlabour relationsrelations c) thethe naturenature ofof competitioncompetition betweenbetween firmsfirms (from(from planplan toto market?)market?) d) motivationalmotivational systemsystem (values,(values, profits,profits, investments)investments) e) thethe placeplace ofof nationalnational economyeconomy withinwithin thethe internationalinternational systemsystem TheThe ‘‘chaoticchaotic’’ modemode ofof regulation:regulation: majormajor featuresfeatures inin UkraineUkraine ! a rapid withdrawal of the state from the economy and de-statisation of social welfare; ‘no industrial policy is the best industrial policy’ ! the most unbalanced monetary and credit arrangements; repeated monetary validation of ever-continuing inflationary shocks; deficit budget spending accommodated via escalating money emissions (= cash printing) ! no mediating role for the state within increasingly antagonistic industrial relations; the hegemony of capital over labour → no wage bargaining occurs; earned wages and salaries are regularly unpaid to be used by the owners and managers as a cushion against bankruptcy; the minimum wage, if exists at all, is set by the state at a level far below the physical subsistence level ! under macroeconomic instability accompanied by the privatisation drive, microeconomic competition is not carried out though the price mechanism within the regulated market place between various firms, but is conducted in a form of ungoverned and physically most brutal struggle between individual entrepreneurs themselves for the chunks of state-owned property and for free or even negatively charged loans issued directly by the central bank ! motivational system is based upon rent-seeking and assets-stripping ! on a global scale, the national economy which is governed by the chaotic mode of regulation fails to diversify its major trading partnership and remains on the periphery of the international economy ChangingChanging thethe rolerole ofof thethe postpost--communistcommunist statestate inin Ukraine:Ukraine: slowingslowing downdown thethe statestate’’ss withdrawalwithdrawal

The pace of Ukraine's de-statization 6.5% 6.0% 5.5% 5.0%

d 4.5% o i r 4.0% e p

r 3.5% e

p 3.0% age

r 2.5% e

av 2.0% 1.5% 1.0% 0.5% 0.0% 1990-1996 1997-2002 Average annual decrease in the public ownership of physical capital stock MixedMixed propertyproperty rightsrights structurestructure

Ukraine: ownership structure, 2002

Industrial production

Agricultural production

Agricultural land

Fixed capital assets

Total labour force

0 102030405060708090100 percentage of total Private ownership (individual or collective) Public ownership (state or municipal) ReturningReturning toto welfarewelfare provisionprovision Changing public spending priorities 100%

90% Other public expenditure 80% 43.9% e 53.7% ur

t 70% 63.7% ndi pe 60% x e t e 50% budg l a t

o 40% Public t f expenditure on o e social welfare r 30% a 56.2% h provision (health s 46.3% care, social work 20% 36.3% and protection, culture, science 10% & education)

0% 1990 1996 2002 FacilitatingFacilitating thethe businessbusiness environmentenvironment ! TheThe BusinessBusiness EnvironmentEnvironment andand EnterpriseEnterprise PerformancePerformance SurveysSurveys (World(World BankBank andand EBRD).EBRD). Qualitative assessments of the business environment: average score by dimension on a scscaleale fromfrom 11 (=minor(=minor obstacle)obstacle) tto 4 (=major obstacle)

19991999 20022002

UkraineUkraine 2.772.77 2.222.22

PostPost--communistcommunist 2.672.67 2.082.08 countriescountries’’ medianmedian Business environment, 1999

Finance 4.0

3.5

Corruption 3.0 Infrastructure 2.5

2.0 1.5 1.0

Crime Taxation

Judiciary Regulation

Poland Ukraine Business environment, 2002

Finance 4.0

3.5

Corruption 3.0 Infrastructure 2.5 2.0 1.5 1.0

Crime Taxation

Judiciary Regulation

Poland Ukraine TheThe UkrainianUkrainian state:state: fromfrom pullingpulling outout toto bringingbringing back?back? Ukraine's public spending trajectory 60%

55%

50%

45% General government sector expenditure 40%

P 35% D Consolidated budget G f expenditure o 30% e r a

Sh 25%

20%

15%

10%

5%

0% 1992 93 94 95 96 97 98 99 2000 01 02 03 TheThe formform ofof capitalcapital –– labourlabour relations:relations: fromfrom socialsocial antagonismantagonism toto socialsocial accord?accord? Increase in tripartite wage bargaining and decrease in industrial disputes 180,000 85%

160,000 80% 140,000 e c r s 120,000 75% r o f e k k r i r o t 100,000 s f 70% l w o ta r e

80,000 to f b o e r num 60,000 65% a h s

40,000 60% 20,000

0 55% 1996 97 98 99 2000 01 02 Striking w orkers Collective wage-rate aggrements coverage, percentage of total workforce Real wage growth 30% 25% 20% 15% 10% 5% 0% h t -5% w o r -10% g l -15%

nnua -20% a -25% -30% -35% -40% -45% -50% -55% 1992 93 94 95 96 97 98 99 2000 01 02 03 MoreMore securesecure jobs?jobs? Ukraine: ILO unemployment 15% 14% n 13% o ti a l 12% u p o 11% p e v 10% ti c

a 9% y l l a 8% c i

m 7% o n o 6% c e l 5% ta

to 4% f o e 3% r a h

s 2% 1% 0% 1995 96 97 98 99 2000 01 02 03 LongLong wayway roundround neoneo--corporatismcorporatism

Wage differentiation within manufacturing 4.75 n o i 4.50 s i v i d

4.25 id a

p 4.00 t s e w 3.75 o l e h

t 3.50

. v

0) 3.25 . 1 = (

3.00 n o i s i 2.75 v i

d 2.50 id a p t 2.25 es h g

i 2.00 e h h 1.75 t f o l

e 1.50 v e l

e 1.25 g a w 1.00 1990 1996 2002 2002 2002 2002 2001 2002 2002

Ukraine Sweden Germany UK USA S.Korea Malaysia InformationInformation andand coco--ordinationordination structure:structure: towardstowards thethe fullfull combinationcombination ofof availableavailable mechanismsmechanisms

StateState interventionintervention ++ MarketsMarkets ++ NetworksNetworks ! IndustrialIndustrial policypolicy (since(since midmid--1990s):1990s): subsidiessubsidies forfor miningmining andand quarrying;quarrying; taxtax allowances,allowances, propro--innovationinnovation preferentialpreferential treatmenttreatment andand coco--investmentinvestment projectsprojects inin otherother industriesindustries ! RegionalRegional policypolicy (since(since latelate 1990s):1990s): specialspecial economiceconomic zoneszones (tax(tax--freefree areas)areas) andand prioritypriority developmentdevelopment areasareas (special(special investmentinvestment regime)regime) ! However,However, activeactive developmentaldevelopmental policiespolicies areare hinderedhindered byby lowlow statestate expenditureexpenditure ! TwoTwo--tiertier corporatecorporate structure:structure: giantgiant conglomeratesconglomerates andand smallsmall && mediummedium firmsfirms UkraineUkraine’’ss FiveFive GrandGrand NationalNational MastersMasters

““FiveFive playersplayers havehave appearedappeared onon UkraineUkraine’’ss businessbusiness field.field. TheThe fivefive playersplayers whowho havehave reachedreached notnot onlyonly thethe levellevel ofof mastersmasters butbut thatthat ofof grandgrand masters.masters. WeWe wouldwould likelike thethe restrest toto catchcatch--upup withwith themthem …… WeWe shouldshould alsoalso drawdraw aa thickthick lineline andand notnot alloalloww foreignforeign penetrationpenetration intointo strategicstrategic sectorssectors …… ForeignForeign penetrationpenetration couldcould bebe aa threatthreat toto thisthis statestate’’ss nationalnational economiceconomic interestsinterests”” -- MykhailoMykhailo ChechetovChechetov Head,Head, TheThe StateState PropertyProperty FundFund ofof UkraineUkraine (press(press--conferenceconference inin ,Kyiv, 2626 DecemberDecember 2003)2003) UkraineUkraine’’ss largestlargest conglomeratesconglomerates

! TheThe BigBig Five:Five: 1. TheThe IndustrialIndustrial UnionUnion ofof thethe DonbasDonbas ((ISDISD;; DonetskDonetsk-- based;based; owners:owners: VitaliyVitaliy Hayduk,Hayduk, SerhiySerhiy TarutaTaruta andand ViktorViktor Yanukovych)Yanukovych) 2. SystemSystem CapitalCapital ManagementManagement ((SCMSCM;; DonetskDonetsk--based;based; owner:owner: RynatRynat Akmetov)Akmetov) 3. TheThe InterpipeInterpipe GroupGroup (Dnipropetrovsk(Dnipropetrovsk--based;based; owner:owner: ViktorViktor Pinchuk)Pinchuk) 4. TheThe PrivatePrivate BankBank GroupGroup ((HrupaHrupa PryvatPryvat;; DnipropetrovskDnipropetrovsk-- based;based; owner:owner: IhorIhor Kolomoyskyi)Kolomoyskyi) 5. TheThe UkrainianUkrainian--SiberianSiberian BankBank ((UkrSybBankUkrSybBank;; KharkivKharkiv-- based;based; owner:owner: OleksandrOleksandr Yaroslavskyi)Yaroslavskyi) TheThe rest:rest:

1. TheThe DonbasDonbas businessbusiness groupgroup members:members: D.A.N.K.OD.A.N.K.O ((Donetsk--based;based; coco--owner:owner: SerhiySerhiy Momot)Momot) andand A.R.S.A.R.S. (Donetsk(Donetsk--based;based; owner:owner: IhorIhor Humeniuk)Humeniuk) 2. TheThe FinanceFinance && CreditCredit BankBank GroupGroup ((HrupaHrupa FinansyFinansy ii Kredyt;Kredyt; KyivKyiv--based;based; owners/associates:owners/associates: KostiantynKostiantyn Zhevaho;Zhevaho; VolodymyrVolodymyr Khlyvniuk)Khlyvniuk) 3. TheThe UkrainianUkrainian IndustrialIndustrial InvestmentsInvestments GroupGroup ((UkrPromInvestUkrPromInvest;; KyivKyiv--based;based; owner:owner: PetroPetro Poroshenko)Poroshenko) 4. DynamoDynamo KyivKyiv F.C.F.C. GroupGroup ((HrupaHrupa DynamoDynamo;; KyivKyiv--based;based; owner:owner: HryhoriyHryhoriy Surkis)Surkis) The Industrial Union of the Donbas (ISD) Chairman of the Board: Mr. (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), (assassinated 1996), 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

Strategic Strategic Shares Shares Shares Alliances Alliances Shares Shares

Donetsk Iron & DONETSK Horizon Mining Stock UkrVuhleMash Steel Combine INDUSTRIAL Krasnoarmiisk Rescue Exchange UzNaftoHazBud Coal-Mining UNION, Coal Mine Machinery Ol'ha Agro Firm Uzbek Oil & Gas Machinery Subsidiary Plant Construction Duferco Keramet (Uzbekistan) Kuibyshev Iron & International Shakty Investment Northern Iron Ore AzovMash Steel Combine Steel Trading Rodynske Machine- Company Concentrating (US-Brasilian Coal Mine, Building Zoria Agro Firm Azov-Eastern TNC) Combine KrasnoarmiiskCoal Machine- Special Factory Donbas Bud Mining Association Building Economic Alchevsk Coke & () Construction Factory Zone Chemicals Krasnyi Lyman Trust Co. Coal Mine Kholodna Balka Kramatorsk Coal Mine, Dianovske Poultry Markokhim Heavy Various construction projects MakiivCoal State Heavy Farm Mariupol Coke Machine Tool (motorways, buildings, stadiums) Panteleimonivka Holding Co. Machine- Works Construction Fire Clay Factory Factory Building Factory Khartsyzsk Tube Northern Coal Finance, Investment, and Snezhnoe Works Kramatorsk Mine, MakiivCoal Pushka Cement & KhimMash Agricultural Union Construction: > 80 - 100% State Holding Co. Chemical Slate Combine Machine- Dniprovsk Tube Machinery Building Works Communist Coal Factory Fedorov Mining Old Kramatorsk Shares Mine, OctoberCoal Meat Mechanics R&D Heavy DunaFerr Iron & State Holding Co. Packing factory Institute Machine- Steel Combine Dnipropetrovsk UkrIndustry (Hungary) Petrovsky Building Metals Steelworks Factory Metalurg Donetsk Region-wide Engineering Bazhan Coal Mine, Football Club Electricity & Natural Consortium MakiivCoal State Karanske Grain Gas Whole-sale Kamiansk Holding Co. Elevator Energomashspetsstal Distribution Machine- Engineering Special Building Machine- ISD-AVIA Air Steels Factory Building Company Energy Construction and Operation projects: Factory DonHirMash DniproDzerzhynsky AzovZahalMash 3 Gas pipe-lines (=200 km-long), Donbas; Donetsk Mining InvestAgroService Iron & Steel Mariupol 1 Gas pipe-line (150 km) and 2 Oil Yalta-Intourist Hotel Machinery Combine Machine-Building Storehouses (3 mil. barrels), Uzbekistan Complex Factory Ferrous Metals: over 95% share Mining and Quarrying, Fuel and Engineering: > 30% control Agriculture: 100% Other Service Activities: control on average Power: > 60% control control >80 - 100% control System Capital Management President: 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-holders Conglomerate headquarters: Donetsk, Ukraine

Strategic Shares Shares Shares Alliances

Azovstal DonMiskBank (Donetsk Sarmat Trading House Kyiv Brewery City Bank; 100%) Simferopol Donetsk (>52%) Dnipropetrovsk No. 1 (>76%) Embrol Ukraine Brewery (93%) Brewery (98%) Ltd. Brewery (>51%) First Ukrainian Kerch Iron & Steel International Bank Combine (>24%) Donetsk Bakery Poltava Pyvo Donetsk Complex No. 1 Brewery Brewery Bakery No. 14 Leman (>24%) (>90%) (>50%) (>46%) Yenakieve Iron & Commodities S.A. ASKA Insurance Steel Works (>58%) () Company (>17%)

Keramet Investment Bakery Donetsk Bakery D.A.N.K.O. Company Complex (>23%) Combine(>16%) Azovstal Iron & Steel Combine Khartsyzsk Tube Banking and Finance Food and Drink Works (>24%)

Silur Khartsyzsk Wire Mill Shares A.R.S. Shares Zaporizhzhia Coke Works (>20%) Shakhtar Donetsk Ukraine TV & Radio Company Markokhim Football Club (99%) (98%) Druzhkivka Ore Mariupol Coke Coke SkhidEnergo Board (>27%) Works Works (>57%) Eastern Electric Digital Cellular Power & Heat Segodnya Publishing Stations AzovMash Mariupol Group (85%) Communications Joint-Venture Machine-Building Mobile Phone Network (>51%) Joint-Venture Hefest Plant (>50%) Donetsk Energy Ltd Petrol Stations Central Iron Ore Kuybyshev Plant (>24%) Atlant Hotels (>50%) Ukrainian Industrial & Transport (>60%) Concentrating Kramatorsk Iron & Company Combine (>25%) Steel Works (>24%) Druzhkivka Machine- Ores Donbas Palace Hotel Concentration October Ores Coke Works Building Plant Concentration (99%) Luxe Hotel (>60%) Factory (>80%) (>15%) Factory Ferrous Metals and Engineering Transport, Communications & Other Service Activities Resources and Raw Materials MotivationalMotivational system:system: fromfrom rentrent--seekingseeking && rentrent--takingtaking toto capitalcapital accumulationaccumulation viavia profitprofit && investmentinvestment

Fixed capital investment 25%

20%

15%

10%

5%

0% h t w o -5% gr al

u -10% n an -15%

-20%

-25%

-30%

-35%

-40% 1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 Profits and capital investments 55,000

50,000

45,000

40,000

35,000 a ni v y 30,000 n hr o i

l 25,000 l i m 20,000

15,000

10,000

5,000

0 1992 93 94 95 96 97 98 99 2000 01 02 03 Enterprise gross profits Fixed capital investment PositioningPositioning withinwithin thethe internationalinternational politicalpolitical economy:economy: fromfrom thethe SovietSoviet autarkyautarky towardstowards geographicalgeographical diversificationdiversification Ukraine: foreign trade distribution 100 0.0 0.1 0.1 0.0 0.2 0.3 0.7 2.4 1.8 0.3.50 0.9 2.1 3.9 3.4 1.0 4.2 2.9 0.7 4.5 3.0 0.8 1.0 Australia and 4.4 5.9 6.0 7.0 Oceania 18.0 18.0 South America and 23.7 75 28.2 the Caribbean 31.5 l 32.7 a t 19.0 North America o t f e o r a

h Africa

s 50 29.8 e g

a 33.3 t 74.5 Asia rcen e p 57.7 56.4 54.1 25 Europe 35.1 27.3 Former USSR

0 1994 1998 2002 1994 1998 2002

Merchandise exports Merchandise imports ClimbingClimbing thethe exportsexports ladderladder backwardsbackwards Ukraine: exports structure 100 3.03 2.3 1.1 4 5.6 Articles non classified elsewhere

21.9 13.9 13.6 Miscellaneous manuf. articles 75 Machinery and s transport equipment rt o p Manufactured ex f 43.9 44.6 39.5 goods, classif. by e o r material a 50 h Chemical products s e g a t Oils, fats and waxes rcen e 9.3 p 13.7 13.2 25 1.9 Crude materials, 0.6 0.9 12.5 minerals and energy 10.9 10 Food and live 10.1 11.8 11.4 animals, drink and tobacco 0 1994 1997 2002 TheThe ‘‘combinecombine’’ modemode ofof regulation:regulation: mixedmixed signssigns ofof successsuccess a) the return to pro-active developmental state (=economic nationalism) and the increased level of intervention through industrial policy; yet hindered by low level of public spending b) the suspension of unregulated labour market policies and the establishment of certain neo-corporatist arrangements c) the combination of markets, indicative planning, and networks (hybrid contracting); two-tier corporate structure → competition of conglomerates within international markets and negotiation between the conglomerates within the domestic market + competition of small and medium firms on domestic and world markets d) the return to accumulation of capital through profit and investment as the basis of value system e) the insertion of the national economy into the international system, occupying low value-added niches ## Will ‘combine capitalism’ accelerate Ukraine’s social progress? 0.93 High-income OECD 0.92 0.91 High HDI average 0.9 0.89 0.88 Slovenia 0.87 High human 0.86 development Czechia 0.85 Poland 0.84 Slovakia Hungary 0.83 Estonia Lithuania 0.82 0.81 e

u Belarus l 0.8 a Post-communist Bulgaria

v 0.79 I average Macedonia 0.78 Bosnia Russia HD 0.77 Ukraine Kazakhstan 0.76 0.75 Turkmenistan 0.74 Azerbaijan Georgia Albania 0.73 Armenia Uzbekistan 0.72 Kyrgyzstan Medium human 0.71 0.7 development Moldova 0.69 Medium HDI 0.68 average Tajikistan 0.67 0.66 Developing countries 0.65 1990 1995 2001 0 – 0.5= poor human development; 0.501 – 0.8= medium human development; 0.801 – 1.0= high human development WhatWhat typetype ofof capitalismcapitalism forfor Ukraine?Ukraine?

! TheThe shiftshift fromfrom ‘‘chaoticchaotic’’ toto ‘‘combinecombine’’ capitalismcapitalism →→ economiceconomic recoveryrecovery andand growthgrowth ! However,However, thethe pacepace ofof catchingcatching--upup isis sluggish;sluggish; humanhuman andand socialsocial developmentdevelopment indicatorsindicators areare stillstill farfar belowbelow thethe prepre-- transformationtransformation levelslevels ! ThereThere isis aa needneed forfor enhancingenhancing thethe statestate capacity,capacity, ifif industrialindustrial policiespolicies toto bebe mademade effectiveeffective ! MoreMore statestate’’ss ‘‘steeringsteering’’ ofof conglomeratesconglomerates towardstowards thethe highhigh valuevalue--addedadded technologicaltechnological stylestyle ! NewNew sourcessources ofof capitalcapital investmentinvestment toto intensifyintensify thethe nationalnational regimeregime ofof accumulationaccumulation