Economic Experts Weigh In On Ukraine’s Progress

Political leaders, government officials, and experts from around the world have flocked to Kyiv for the annual Yalta European Strategy (YES) conference held at Mystetskyi Arsenal on September 15-16.

Ukraine’s reformist former Minister of Economic Development and Trade, Aivaras Abromavicius, and Nobel Prize-winning economist Paul Krugman used the opportunity to weigh in on economic progress and reform in the country.

Abromavicus said that he believes his resignation in 2016, during which he sounded the alarm about elite pushback against reforms, improved the situation for other reformers in Ukraine and “paved the way for less interference for the work of the colleagues that stayed.”  But while the dynamic has been positive in some ministries and certain reforms have succeeded, Abromavicius wants to see these positive developments “prevail in more institutions to make a bigger impact.”

Krugman said he was impressed with how quickly Ukraine stabilized its economy after the crisis and compared the Ukrainian turnaround to successful reforms he witnessed in developing countries. While Ukraine doesn’t yet have a formula for achieving major economic growth, Krugman said there is knowledge of “how to produce a situation that is not boiling over.”

Hromadske spoke with journalist David Patrikarakos, a contributing editor at The Daily Beast and contributing writer at Politico Europe who has extensively covered Ukraine, about the YES conference, Krugman’s comments, reforms, and the stories about Ukraine the press often misses.

Paul Krugman: It’s actually been quite impressive given the nature of the crisis that Ukraine went through in 2014-2015, to see the economy stabilize. It’s not a roaring boom but at least off the bottom, some of the danger signals have really receded, they’ve gone from red lights to yellow lights in terms of budget deficits and inflation. And what’s striking, given the theme of what I’ve been talking about, ‘How did Ukraine do that?’, it did that pretty much in a familiar way. The Ukrainian turnaround looks a lot for someone with my background, looks a lot like successful reforms in developing countries that have happened many, many times. It looks like reforms that worked in Latin America, getting away from a commitment to an unsustainable exchange rate, letting a combination of depreciation and rebalancing domestically, bringing back into sustainable territory. It doesn’t solve all your problems. If you want to ask me, ‘How do you achieve really major economic growth? How do you take off?’ The answer is: ‘We don’t know, and we never have.’ So in that sense, things have not changed.  Do we know how to produce a situation that is not boiling over? We do, and Ukraine has done that.

So David, a rather optimistic view from the world-renowned economist, but a pessimistic view from the Ukrainians who were trying to deal with the issues. Do you feel that there is some disbelief with the young reformers? That is what the former Economic Minister said, that they didn’t make it. Do you think there is still hope for a new generation that western investors would trust?

David Patrikarakos: A lot of hope was placed in this generation of reformers because one of the many things about Maidan is a galvanized civil society. And it created activists who became politicians. Mustafa Nayyem from your own channel is an example of that. So there is a generation — people like [Ukrainian MP] Hanna Hopko, people like that, who did great work before and are now in the Rada. But I think it’s possible that too much expectation was put on their shoulders. Because we go back to problems that are entrenched and generational.

And what would be the untold stories? What doesn’t the west or the foreign audience get from Ukraine enough?

David Patrikarakos: The untold story… it’s not untold but I think people need to focus what’s happening in the east again. It seems to have dropped off the radar but people are still getting hurt there. It’s calmed down a lot. Other than that, I think people need to understand Kyiv. I saw recently that Kyiv was voted as one of the most unlivable cities in the world — that’s nonsense. Kyiv is one of the most dynamic and thriving European capitals that I’ve been to which is why I come here so often. So I think there needs to be a general level of knowledge about Ukraine — not just politically but culturally and socially. That’s what I feel. I feel it has a warped image in the public consciousness, it’s thought of as a place of war, for obvious reasons. Or as a grim Soviet former republic, which is very far from the case — it’s a wonderful place. It’s a place with a lot of potential, it has a lot of natural resources, this country can feed Europe. It has a lot going for it. The problem with Ukraine is the people, it’s the politicians. The actual landscape, the soil that you have is great. But as is often the case, politicians — and it is getting better — who for twenty years stole from the country.