10.07.2007 | Nikolai Kozyrev

The reasons for the political crisis and the threat it poses to society


Nikolai Kozyrev:  The reasons for the political crisis and the threat it poses to society

We publish an address given by human rights defender Nikolay Kozyrev to the Civic Regional Assembly Forum in Luhansk on 23 June. Those attending from all over the Luhansk region engaged in animated and critical discussion of the pre-election political situation and the activities of politicians of all levels. The general feeling was that it’s not only the stables which need a clean up, but their owners. The elections should provide such a clean up, but will they?  

My topic is as many-layered as a Napoleon cake. I will try to avoid theory and stay with those layers which are closest to the surface. Maybe it will be possible to gain a deeper view.

I would like to consider here how this political crisis is affecting human lives. If by crisis we concentrate only on the events we see on television, all the scuffles in parliament and arguments, the coalition-opposition reshuffling and so on, we can lose sight of the real issue.

I would begin with one fundamental point which is that political crises do not just appear. They are always an indicator of crisis in the economic, business and social-cultural spheres, in the way of life.  And one more thing: it is more important right now to correctly pose questions than to provide hasty answers.

Let’s begin by considering some victims of the crisis and try to find the common denominator.

Last week in the village of Makartetino, the Novopskovskovsk district, a 50-year-old man hanged himself. This village has excellent black-earth fields, and in Soviet times there was a cattle-breeding industry with 3,500 head of cattle. The latter has now, of course, been plundered. The fields are not sown, because the previous “grain grower” from among the rural "new Ukrainians" whom agricultural reformers were pinning their hopes on, took 5 million in loads, never returned them, transferred all assets to another business and bankrupted the village. Now another "economic party" has appeared, has begun to prepare the land for sowing, but has hired only four people from the entire village.

The deceased was trying to get a job in Russia, but only 19 out of the 70 hopefuls were chosen. There seemed no way out and he hanged himself. The village is plunged into the darkness of total disintegration, with the collapse being not only of the former production facilities, but of the traditional rural culture of work, destruction of the century-old institution of solid peasant household as an oasis of life. Now the only distraction in the village is hard drinking. Or death.

Another example: I recently spoke with a businessman from Krasny Luch who is, by local standards, successful. He said that for three years he’s been trying to get a permit to process coal remnants in Antratsyt. He’s spent huge amounts of money on all kinds of technical and economic justification and assessments, and he’ll need a further 25 thousand dollars to get a licence from the government. There is no other way, and the outcome is unpredictable. If the project proves interesting to, say, Klyuev’s people, they could intercept the initiative at the last stage. And all the money, years of work and project documentation will turn out to have been for nothing. This businessman says bitterly that in China such questions are settled within 10 days.

And as a third example of the crisis, I would mention the situation in Krasnodon where at the Barakov Mine the output per worker has risen because the coal production plan is increasing year by year, and earnings are decreasing. The coal miners are up in arms and the independent trade union has initiated a labour dispute. The General Director of "Krasnodon Coal" was invited to a meeting with the men but arrogantly ignored the invitation. So he miners didn’t go down the mine but made their way to the Director themselves and it all almost ended in a fight. The Director’s response – “If need be, I replace all of them”.

These examples seem typical to me since through them you can try to understand what is happening in the country, just in the sense of understanding the "political crisis" as a reflection of the inability of the country to develop in the socio-economic sphere. So what is happening? What kind of life do we have? And what’s the essence of the crisis?

This kind of social structure is called feudal-monopolistic.

Let’s pose two simple questions. What are the conditions under which the country will be able to fit at least onto the periphery of the post-industrial world, the global economy? And the second – what is stopping us being there now?

It is not too difficult to answer the first question – our economy has to be competitive, based on modern scientific and information technology. And it’s not. So why not? 

It is not competitive because the economy doesn’t need slaves or hirelings, but free, highly-skilled and highly paid workers, whose knowledge and skills are the most important part of the capital. And accumulation of financial wealth in a post-industrial world is impossible without social and cultural capital.

Where are such professionals trained? They probably don’t emerge from institutes where students have more interest in drinking and pay money to pass their exams. Incidentally, in the 19th century Japan began its move into the modern world by sending students in large numbers to German universities.

Our industrial base is outmoded and decrepit in an age of post-modern technology. And in the areas where it’s still working (Krasnodon, Alchevsk), it’s based on the low price of the final product (metal) which makes it sellable abroad. And the cheapness is provided by the exploitation of labour.

These days it is countries which export modern technology that are developing. Malaysia, for instance, earns much more on the export of information technology than Ukraine on the export of metal and other products.

What does this situation mean for a Ukrainian worker?  Let’s look at the buying capacity of Ukrainian workers, as compared with their American, Polish, Russian and Belarusian counterparts. Specialists calculated how long they’d have to work to buy 35 basic commodities, from toothpaste and shoes to a flat of 60 square meters in the capital, an airplane ticket for an international flight of 1000 km of and a Ford (car).  The results:

- an American – 8 years 11 months,

- a Pole – 14 years 10 months,

- a Russian – 27 years,

- a Belarusian – 33 years,

- a Ukrainian – 55 years.

By the way, in 1990 our worker would have had to spend only 14 years of work for that.  So how can we explain this devastating “achievement”?  Looking back in history, we see:

1. The Soviet legacy. Investments in the oil and gas industry in the 1980s (300 billion dollars) stifled high-technology industries and these became degraded first after the collapse of the state.

2. Kuchma’s era saw the destruction of the state. It was a time of forays and robberies by both mobile and settled bandits, who robbed and killed first, and then privatized the industrial sector of the economy as well as, incidentally, government institutions, courts, prosecutor’s office and police. The result was the formation of an oligarchy as political regime, based on monopolization of resources and power. Corruption is a product of this monopolization.

3. The era of Yushchenko.  There were attempts to resist the criminalization of power. But in vain: the President soon realized that all economic power was in the hands of the mafia, and that you needed to find a way of talking to them, negotiating. And the hard-line tactics of Tymoshenko’s government with its review of privatization deals in order to overcome the monopoly of the oligarchy and anti-corruption strategy ended with the scandalous dismissal of the Cabinet, the Memorandum and to a new coalition in the Verkhovna Rada. Then a new task emerged being to provide the political legalization of power of the oligarchs and turn the Ukrainian state into a Ukraine-corporation.

However such an economy and political system channels all assets offshore. And even if we see some investments in basic capital, for example at AMC (Alchevsk), this will only last while the price of metal is high and that of labour low. If the price drops, so will investments. And, importantly, the economy is not able to finance social programs. We remember how the budget-2007 was compiled.

We thus have exploitation of property and labour, and we see the consequences:

communal tariffs;


capital leaving Ukraine and external loans;

the exodus of a disfranchised workforce;

exhaustion of soil and degradation of rural areas;

degradation of social structure.

Raider seizure of property, non-return of VAT, all old "azarovschina" [the methods under Azarov, Minister of Finance in Yanukovych’s government (the plant "Intersplav" is one of the victims of the system. It’s owed 23 million in VAT which they’re brazenly refusing to pay it: “Klyuev’s people" need its bankruptcy).

If one looks at the situation realistically, we must acknowledge that our society is far from liberal democracy and civic society. Ukrainian society, despite the assiduous “Westernization” initiatives of those at the top sometimes moves in the direction of the western model of democracy, and sometimes backs towards the restoration of the Soviet state paternalism, where people were totally dependent on the state.

Now, to each attempt at reform according to western recipes, our society generates new type of paternalism to replace that destroyed. So it was in Soviet times, when the collective farms replaced communities, shattered by Stolypin’s reform, and the old Brezhnev paternalism simply takes on new forms, under the grey flag of Kuchma’s oligarchy or under the quasi-party coloured flags of financial-industrial groups.

The only difference is that now, instead of state paternalism we have private paternalism. These days a money-bag (a feudal lord) has his own clients. Today’s hired employee is not a freelancer, who sells his work for a competitive market price. He works for his bit, for which he must be grateful, and not complain or protest.

Quasi-parties and quasi- trade unions are headquarters for mobilizing clients dependent on the master’s caprice. Today they must work, tomorrow - build a house or seize property of a competitive company, then go to Maidan in support the master-exploiter.

So do we have a civic society and the legal, social state? Well, that’s what the Constitution says.

Where do we look for a way out? Perhaps the answers can be different. But from the standpoint of representatives of civil society, now, before the election, there is a need to seek consent and consolidation not on the basis of "agreements" between political wheeler-dealers, but on the basis of the priorities of national development.

A new social contract between influential groups: government, business, trade unions and political parties, is necessary. Here is the minimal list of these priorities:

1. Approval of laws on the separation of business from power.

2. Revision of the results of privatization on the principle of "pay and own" for minimizing the shadow economy and encouraging the capital inflow.

3. Only on this basis will it be possible to create a project of modernization of the country, which, in turn, will become the basis for social peace.

4. Political democracy in the country must be based on economic democracy – on access of employees to property of companies and members of communities to communal property.

5. The State should intervene in business with only one purpose – for overcoming the limited size of the domestic market by increasing household incomes and involvement of all country property in market turnover, as well as for levelling branch profit norms.

6. The main task of officials of power organs is efficient management of state and municipal property, social security of citizens. The number of officials depends on the size of the property, and the size of their salaries – on efficiency of its capitalization.

7. Decriminalization and de-corruption of courts, prosecutor’s office, police, the Security Service [SBU]

8. Freedom of expression and independence of mass media are the fundamental precondition for effectiveness of power, establishment and functioning of social and cultural capital.

9. Considerable part of the GDP must provide the services of public organizations. In America this part makes 8%, in Holland - 16. No one has counted it in our country, but there is nothing to boast of.

If we do not struggle for this, the miners of Krasnodon will remain slaves to Akhmetov’s capital, the businessman from Krasny Luch will leave for China, and the death of a farm worker from the village of Makartetino will be not only his tragedy, but our curse.

Slightly abridged

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