What Type of Capitalism in Ukraine?
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WhatWhat typetype ofof capitalismcapitalism inin Ukraine?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