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ECONOMIC ANALYSIS

We offer to the reader two rather lengthy articles. The first of them analyzes the state of Russian economy, while the second tries to understand which part of the arguments can be applied to the Ukrainian economy.

Russian virtual economy

The immediate reasons of the Russian financial crisis are obvious: the enormous budget deficit and the government’s inability to service debts. The simple ways of solving the problem of liquidity of short-term loans, which are now suggested by many experts, seem to be equally obvious. The Russian government should diminish the budget deficit by improving the tax collection and reducing state expenditures. The experts suggest that international financial organizations and developed Western countries should create a salvage credit package, which may include costs of the stabilization of the financial situation and doubtless a program of restructurization of the Russian debt. The experts are sure that such methods will enable the government resume reforms of the economy.

However, the idea that economic problems of Russia can be solved in this way is erroneous. The idea is based on the fundamental (and almost common) misunderstanding of the nature of the Russian economy, which can be characterized approximately so: Russia is a great privatized economy, whose first successes in the sphere of market reforms were darkened by corruption, crime and incompetence; the explosion of barter and non-payments is the consequence of unskilled and amoral management; scarce tax collection resulted in weakening the state; it is very difficult to overcome all these obstacles, but if it happens, the economy again will march towards market.

In actual fact, the bulk of the Russian economy has not yet begun to move towards market. It actively moves from market. During six years of the ‘radical reforms’ Russian companies, especially from principal productive branches, did change the principles of their activity. However, they did it not for joining the market, but rather for protecting themselves from the market. One may say now that an economic system of a new type has appeared as a reaction to the attempts to reform it, a system with its own rules of behavior and criteria of success and failure.

We shall call such a system a ‘virtual economy’ since it survives on the illusion; it pretends to have almost all important parameters of an economy: costs, volume of sales, wages, taxes and budget. It pretends to be larger than it really is. This pretension permits having a larger government and larger expenditures, than Russia can afford. This is the real reason that created pay arrears and fiscal crisis which Russia cannot overcome.

In what follows we shall demonstrate the scale of the virtual economy and its roots. Besides, we shall demonstrate how the virtual economy model can explain some features of the current political processes in Russia. We shall prove that the virtual economy is powerful, deeply rooted and supported by the people. This illusory economy waves the motto ‘towards new reforms’ which is used by the current government and which, perhaps, will be used by subsequent governments.

The virtual economy puts before the West a complicated problem to decide: to aid or not to aid Russia in her transfer to market. The main stock of arguments for aiding Russia includes the conviction that this money will be given not only for the support of social and political stability, but will also become a stimulus of further reforms. We believe that the truth is absolutely opposite, i.e. granting salvage credits will support the virtual economy, a non-market system by its nature, whose inefficiency will guarantee further economic decline. At best, such credits will postpone the requital day. And when this day comes, economic and political consequences of the virtual economy will appear even more terrific than they could be today.

The real and pretended

That common illusions about the Russian economy are false, ant it becomes obvious after a scrutiny of statistical data. The National Statistical Directorate informed that after the eight-year decline the industry output in 1997 grew by 1.9%. But let us dig deeper. Real profit in last year industry decreased by 5%. The part of industrial enterprises which declared themselves to be unprofitable became 47.3% (two years ago their proportion was less than 27%).

Another good indicator of the real state of economy is the investment level. Last year, as well as during seven previous years and 1998, this indicator decreased again and equaled only 17% of the 1990 level in such sectors of economy as industry, agriculture, transport and communications. In metal-working and machine-building industries the level of real investments equaled 5.3% of the 1990 level.

Few analysts mention this pitiful state of things. Up to now bankruptcy is a rarity. More companies went bankrupt in the USA during the last month than in Russia during 1997. Thus, it seems that although Russian industrial enterprises are unprofitable, nothing changes in the Russian industry. However, it is not quite so. These enterprises are not reduced or quietly dying – they expand: in 1997 they had more workers than in the previous year. All is crowned by the notorious crisis of non-payments and pay arrears. This crisis is usually described as follows: enterprises do not pay to their suppliers, the latter do not pay to their employees, the latter do not pay taxes. Many mass media popularize this version, but in real fact the picture is somewhat different. The payments are done but not in the money form. The proportion of barter in ‘payments’ among industrial enterprises in Russia exceeds 50% now. Last year 40% of state taxes were paid in the non-money form. In local and regional budgets the level of barter is still higher. All above-mentioned phenomena are characteristic mainly for large industrial enterprises. Last year the special commission of the Russian government made public that the largest companies perform 73% of their operations through barter and other non-money forms. The companies pay state taxes not with money either: they paid 80% taxes to the federal budget (not a very bad figure), but only 8% were paid in money.

We shall quote the conclusions formulated by the commission in its report: ‘an economy has appeared where the cost of an item is not paid in money, where the money is not paid in time, where the mutual debts cannot be paid in a reasonable time interval, where wages are counted but not paid and so on. This creates illusory or virtual profits which result in unpaid or virtual taxes or payments to other businesses through non-market of virtual costs’. This is the virtual economy.

Roots of virtual economy

Roots the virtual economy lie mainly in the non-reformed industrial sector inherited by Russia from the USSR. Many enterprises still produce goods which lower the cost. This sector of economy survived six years of market reforms. There are many reasons of this striking phenomenon, but the most important one is that a Russian company may operate without paying its bills. It is possible because the cost is redistributed over other sectors of economy. A company may also postpone paying taxes, which in fact is a continuation of budget financing, in a somewhat different form. But the most important factor is the direct redistribution of costs from the sectors producing raw materials to those that process the raw materials and diminish the cost.

Here one must understand how it all is connected with the past. The Soviet industry was actually financed at the expense of decreased costs on raw materials and insufficient assignments to capital. Thus an illusion was created that the economy had a great producing sector that created worth; in fact, the production decreased the worth, although it was covered by arbitrary costs. So the roots of the virtual economy lie in applying such methods.

A simplified accounting model

In order to understand the main features of the current Russian economy let us assume that it consists only of four sectors. The first one is the sector of domestic economy which is the supplier of the man power. The second sector is the governmental or budget sector which transfers the taxes to the domestic sector. The third is the sector produces raw materials and fuel, say, gas for definiteness. The fourth sector processes raw materials and makes end-products, but in such a clumsy way that it diminishes worth (of manpower and raw materials).

Suppose that the latter sector is a plant which uses manpower from domestic sector for 100 rubles, gas from the gas-producing sector for 100 rubles and produces goods worth 100 rubles. The last sector diminishes the worth by 100 rubles, but it pretends to create the added worth. To this end, the plant determines the cost for its production equal to 300 rubles. All are satisfied by this illusion , and they may use the expensive product for barter (where costs is meaningless) or for paying taxes.

The end-producing plant pays for gas, giving to the gas producer only one third of its end product and declaring that the pay to the gas producer costs 100 rubles (in the market economy it will cost 33.33 rubles). The gas producer is satisfied because he pays with the end product his taxes (we assume that the taxes of the gas producer is 100 rubles). The end producer R pays its own taxes (also 100 rubles).

Some problems arise only in the domestic sector where people expect to get 100 rubles for their work, since they cannot take their pay in the end product. They need cash, at least partially but the money cost of the end product is 33.33 rubles. Whence pay arrears.

Certainly, this is a very simplified model, but it depicts the main scheme of how the Russian economy got into a trap. Add several details to this scheme, and you will get a good description of the virtual economy, which is characterized not only by pay arrears, but also by an irreal budget, non-payment of pensions and the illusion of growth of the output.

This four-sector model enables one to see whether different political recipes will be helpful or useless. Let us take, for example, the campaign of collecting taxes which was dictated by the international currency fund. The Russian government pressed the enterprises, forcing them to pay taxes in money. Our model clearly demonstrates that such methods can only move the money mass because it is too little to satisfy the demands of the budget (taxes) and workers (wages). This means that either the taxes will be paid, or the wages. During the last three months of the current year the tax-collecting service increased the money influx by 5 billion rubles. At the same time pay arrears grew by approximately the same sum.

Why Russians like virtual economy?

The system described by us cannot exist (at least, exist for any considerable time) under market economy conditions. However, it does exist, and seems to become stronger day by day in Russia. In order to understand the causes of its power, let us turn to our model and see what will happen if such operation were stopped. Suppose that everybody, including the processing industry which decreases worth, stopped to pretend and confessed that the end product really costs 100 rubles.

First, the processing plant would have to report that it lost 100 rubles and not gained them. So the plant would have no money to pay taxes. Moreover, having earned only 100 rubles, the plant would not be able to pay 100 rubles to the gas producer and pay 100 rubles in wages to the domestic sector. Suppose the plant would divide 100 rubles fifty-fifty to the gas producer and to the domestic sector. Then the plant would have pay arrears for 50 rubles and debt of 50 rubles to the gas producer. The latter would pay to the budget 50 rubles instead of 100 and will owe 50 rubles to the budget. The only entry for the budget will be 50 rubles from the gas producer, and the remaining 50 rubles the budget will not pay, say, to pensioners.

Comparison of virtual and real indexes

Our explanation could be more detailed, but the general picture is clear. It is reasonable to sum up the results of the national economy indexes in the tabular form. We shall see that most indexes of the virtual economy are better than their real counterparts.

Indexes of virtual and real economies
	Virtual	Real
Volume of sales	400	200
Profit	200	0
Profit (%)	50%	0%
Total added worth (=GNP)	300	100
Output	400	200
Budget, plan	200	100
Budget, result	67	50
Incomes of workers
Counted	300	200
Real	100	100
Pay arrears	67	50
Payments among enterprises	0	50
Taxes	0	50
Budget	133	50

Figures concerning the budget deserve additional explanation. The plant budget equals total taxes and total expenditures based on the expected profits. In reality, the real budget is half of the virtual one. What does it mean? If we assume that the budget expenditures are pensions, then the nominal pension will be decreased by 50%. Really, nothing changes. In actual fact the government would fulfil its promises better in the real economy (50 out of 100) than in the virtual economy (67 out of the promised 200). Nonetheless, an illusion appears that the pension will be halved! It is interesting that planners treat this illusion as a fact.

Now let us consider debts. There total size is the same both in the virtual and real economies, but in the real economy two new types of debts appear. The gas producer has a debt to budget, because it underpaid taxes and the processing sector owes money to the gas producer. So the fetters of mutual debts become stronger than in the virtual economy.

However, the consequences of demolishing the virtual economy will become most striking if we consider a worker who gets the end product. The virtual economy hides the fact that he lowers the worth. In the conditions of the virtual economy this worker seems to increase the worth, but it is not so.

In general, no one of the participants of the virtual economy would win, if this economy were liquidated. Any attempt to leave the virtual world for the real one will be, mildly speaking, unpopular. It will result in lowering pensions, in irritating the gas producer (which would have to pay larger taxes, bankruptcy of end producers, unemployment and poverty.

The virtual economy appeared due to a combination of 2 fundamental factors: (1) the most part of the Russian economy (especially, its end-producing sector) decreases the worth, whereas (2) most participants of the economic process pretend that it is not so. Barter, non-payment of taxes and other non-money forms of payments become the main mechanism of supporting this illusion, and this illusion is the cause of all problems of non-payment because the produced product costs less than it is demanded and expected.

Need of money

The virtual economy must dislike money, since payments in money uncover the illusory character of such economy. Besides, if an enterprise has money, then the tax collecting service can refuse to take taxes in products. Last but not least, the Russian racket hunts for money. Nonetheless, there is a certain proportion of money that must function in this economy, for example, for paying wages. A contradictory situation appears: a non-market system demands market, since only there some money can be obtained. The main source of money in Russia is the external market.

Since 1992 export is considered to be one of the best components of the Russian economy of the transitory period. Everyone is convinced that the growth of the export testifies that the Russian economy is able to respond to the high demands of the international market. In fact it is not so. Most Russian exporters really loose money. However, in the virtual economy the purpose of the export is not profit, but just earning some money. In the domestic sector the workers share their efforts between the work in the end-processing sector and earning cash by hook or crook. This activity is not a threat or alternative to the virtual economy: it supports the virtual economy since it decreases the minimum of money which the domestic sector must get from other sectors.

The money that Russia earns is little. By Western standards our greatest financiers and capitalists are paupers. The most prominent financial baron Vladimir Potanin has the greatest bank that would not get into the first hundred of banks in the USA.

This material was developed in Filip Orlik Institute of Democracy and taken from the Internet.

Once more on virtual economy

T.V.Danko, Kharkov

The above-written article is undoubtedly interesting and provokes many questions and comments. Does the virtual economy really exist? Is the situation in Ukraine such as in Russia?

The article under consideration asserts that in Russia there exists the virtual economy when the sizeable part of the GNP is obtained by enterprises which not add to, but demolish part of the worth of the used resources in processing. Such enterprises are interested in retaining barter and are guilty in the non-payment crisis. The article also affirms that all participants of the Russian economic system are unwilling to liquidate the virtual economy, and so it is powerful, deeply rooted and supported by the people.

Upon the whole we agree with this idea, but we would like to add the third factor: the unsuccessful reforming of the economy which forced the enterprises to survive by any methods available. The reason is known by all – this is the low ability to compete in the world market. Thirteen years ago M.S.Gorbachev started the campaign to improve the quality of Russian goods and introduced state quality control. All the efforts failed within the socialist economy, so some steps were made towards market economy: first self-financing, then privatization and liberalization of the foreign trade.

All these measures had to improve the ability to compete, but in fact it appeared that uncontrolled and unaccustomed to work under new conditions captains of industry began to demolish production. Then the inflation began and the investing ability of enterprises fell to zero. The liberalization of foreign trade ruined the cost system that worked in the former USSR. As a result, a great proportion of enterprises appeared that, within the new world cost system, decreased and not increased the worth of the used resources. To close such enterprises means to increase unemployment to the social dangerous level. Besides, the world conjuncture can change, and under new conditions such enterprises can again become profitable, but to resume the production will demand unaffordable investments. Let us consider an example. If Ukraine closed metal producing enterprises, then the world supply of steel would fall by about 40 million tonnes per year. That will automatically lead to soaring world prices for steel. What shall we do then? It is safer to wait until Japan or South Korea will close their metal producing enterprises.

So let us agree that the virtual economy does exist in Russia. Then it exists in Ukraine too, because the same reasons have operated in the both countries. How can we estimate the level of Russian and Ukrainian economies? According to the data of the World Bank in 1996 the GNP per head in Ukraine was $1200, in Russia it was $2410 and in the USA it was $28020. Is it bad? Oh, yes. But in Mozambik this index was $80 so when I hear that the decline in Ukraine reached the bottom, I answer: ‘Sorry, but it could be diminished more by the factor of 10’. The analyzed article says that the Western help will only support the virtual economy. Here I cannot agree with the authors. The authors confuse causes and consequences. The virtual economy is the consequence of the multi-year economic crisis and not its cause. The West is to support Ukraine and Russia in the process of transition to market, there is no other alternative. The more so we pay for credits, so these credits are not just charity. The question is whether Ukraine and Russia use these credits efficiently for improving their economies? This question is a part of a larger question: whether the government of our countries efficiently rule their economies and whether their parliaments adopt efficient laws to promote the development? During 1997 the external debt of Russia grew from $123 billion to $145 billion, while expert estimate that $50 billion left Russia. It happened because the state does not create normal conditions to make money work inside the country.

Here we have come to the core of the problem: the state must create optimal conditions for the development of national economy. The idea that market will do all automatically, is erroneous. An instructive joke circulates in Poland: ‘How many people are needed in a planned economy to screw in a bulb?’ – ‘Three: one to plan, one to screw and one to control’ – ‘And in a market economy?’ – ‘Nil: the market will do all automatically’. Market is a great factor in Western economies, but, which is very important, the state sets the rules of market play, controls the situation and, if necessary, interferes, using its economic and legislative levers.

Only if we all understand that the state (the President, Parliament and government – together) takes the role of the locomotive of the economic development, then the situation will improve both in Russia and Ukraine. Otherwise we shall have the virtual economy, the wild market and a continuous series of economic worries, which our rulers will be permanently busy to liquidate.

What can be these efficient measures of state control over the economy? Here is a list, far from being complete: guarantees of the free access to investments for those enterprises who are able to use them efficiently; improvement of control over the state sector of economy; creation of the modern market infrastructure; development of programs of economic growth for every branch and region; using custom regulations to protect domestic producers; simulating the application of most modern technologies; favoring those enterprises that have minimal debts before the budget, personnel and suppliers; reasonable personnel control, including the dismissal of those officials who are unable to control the fiduciary objects; information support of exporters by the corresponding state agencies. All these must be links of the efficient economic mechanism.

TROUBLED TIMES

Purge all committees

Evgen Zakharov, Kharkov

Sergo Laminadze, the editor-in-chief of the magazine ‘Voprosy literatury’ (‘Questions of Literature’), when he was a political convict in Stalin’s time, wrote such a jingle:

And here it becomes obvious that money can be earned preferably in crooked ways, because straight ways are blocked by a monster – a cruel, inefficient, greedy and very expensive state machine. Too many committees have remained and have appeared instead of the Communist party ones, committees omnipotent and irresponsible that poison our life. Here are some petty examples from the life of our human rights protection group.

The big building, where we and many other organizations rented offices, attracted the eye of a new mighty committee, the district tax inspection. They started the brutal campaign of ousting the organizations from their offices. Pressure and threats followed, then the electricity was cut off for two months. Those, who did not give in, were thrown out bodily by militia. The district prosecutor – the local guardian of law – was present and smiled benevolently. Still another committee to be purged.

We kept our finances (obtained from the US fund in Support of Democracy) in a commercial bank. The bank was closed by another unpurged committee – the National Bank of Ukraine. The commercial bank was closed for risky policy, since it worked with state obligations, whose payment was deleted by the government by the indefinite time. The bank returns the money to physical persons on the following conditions: 1,000 grivnas for grivnas investments and returns investments in hard currency by grivnas at the old exchange rate when grivna cost two times more. To juridical persons, which our group is one, the money is not returned at all. It rumors that the money will be paid back in the happy future when Ukrainian finances will blossom.

More tragic examples can be quoted from the complaints that come to our group. The region court considered the cassation of two peasants who had stolen a bag of corn from a combine harvester. The verdict of the district court was confirmed: each got four years of incarceration. A tiny detail that the peasants had not got their wages for 18 months, which is equivalent to the theft by the state of several tonnes of corn from the peasants, was certainly ignored. Many offices should be purged to stop such scandalous injustice.

Many complaints at law enforcing agencies come to our group, but later, when the complainers must give details and names, many of them get afraid and refuse to give further data.

Too many committees should be purged.

HUMAN RIGHTS PROTECTION PRACTICE

In order to protect some rights one must know them

Aleksandr Bukalov, Donetsk

Fifty years ago the UNO adopted the Universal Declaration of human rights, but even today these rights are violated in many countries, and the text of this document is practically unknown to citizens. It was said at the press conference held on 7 October by representatives of Donetsk public organizations: local branch of Amnesty International, Donetsk ‘Memorial’ and the regional branch of the Committee of Ukrainian voters.

These organizations strive to make citizens learn their rights. Amnesty International held, jointly with the Committee of human rights of the Council of Europe, a seminar on the court reform, published all its materials and organized a number of seminars for teachers of human rights at school.

Donetsk ‘Memorial’ possesses hundreds of copies of juridical literature and plans to open the library on human rights. At present an international seminar on reforming the penitentiary system is prepared. It will be held in Donetsk in November. Activists of the Committee of Ukrainian voters participated in the election as observers; they do all to acquaint Ukrainian citizens with laws, thus promoting democracy in our society. After the press conference the representatives of the above-listed organizations distributed the text of the Universal Declaration of human rights in Donetsk downtown. In the framework of the campaign maintained by Amnesty International throughout the world they gathered signatures for observing the Universal Declaration. On 10 December, on the day of celebration of 50-years anniversary of the Declaration, hundreds of thousands of signatures will be passed to the UNO.

Human rights in Ukraine and the Universal Declaration: a report at the seminar in the University of internal affairs

Evgen Zakharov, Kharkov

One must greet the fact that this seminar devoted to the 50^th anniversary of the Universal Declaration of human rights is held in the University of internal affairs. It testifies that principal changes have occurred in our life: ten years ago such an event would be absolutely impossible. However, if one starts comparing the norms of the Universal Declaration with our actual reality, one will loose much of the optimism, since it is obvious that a long way separates us from the realization of many norms. Ukraine is still one of the world champions in the number of death verdicts and in the proportion of incarcerated per 100,000 of population; application of torture during operative and detective activities is still a common phenomenon. It is difficult to assess our courts as just; on the contrary, independent experts assert that half of verdicts are unjust. The level of the personal immunity leaves much to be desired. I even will not say about social and economic rights that are set in the Universal Declaration and fixed in our Constitution. The declared rights for a sufficient living standard and for social protection look rather like an offending jest.

In general, one must confess that the state of observing human rights for two recent years has much deteriorated. One can observe how very dangerous tendencies are steadily growing. First, I mean the increase of the administrative pressure on the side of the state. Its attempts to regulate in detail life in any sphere, which noticeably restricts the personal freedom. Secondly, the political life has become much fiercer, and the state applies, mildly speaking, noncivilized ways with using law enforcing agencies to defeat political opponents. This results in growing arbitrary actions and irresponsibility of the said agencies, on the one hand, and in the feeling of unprotectedness of everybody, on the other hand. Thirdly, implementation of secrecy, of hushing up, of limiting the access to the official information. State agencies operate like owners of the official information, classifying as ‘top secret’, ‘secret’ and ‘for service use only’ the documents holding the information which must not be kept secret. This makes a great threat for human rights, since only the well-informed society can perform one of its main functions: the oversight of the activities of state power organs. Unfortunately, the civil society in Ukraine is weak and is unable to carry out these functions properly.

I will present two examples, blatant in my opinion. The first one: Sergey Golovaty, the former Minister of Justice, declared in summer in his interview to radio ‘Liberty’ that state-employed killers exist in Ukraine. In several weeks murderous assault at the opposition politician and a newsman Sergey Odarych was attempted. The victim, who remained alive, declared that the attempt was not related to finances and that he had only one opponent, President Kuchma, who could profit by his death. As far as I know, these declarations did not provoke any reaction both from the authorities and society. How can it be assessed?

Another example. The newspaper ‘Politika’ (No.19 of 20 May, 1998) published a letter classified as secret in which the General Prosecutor’s office, after checking the materials passed to them from the President’s administration, addressed some district prosecutors of the city of Kyiv and told them to institute criminal proceedings by the indicated articles of the Penal Code against the newspapers ‘Pravda Ukrainy’, ‘Vseukrainskiye vedomosti’, ‘Kievskiye vedomosti’, ‘Politika’, ‘Silski visti’, ‘Tovarysh’, ‘Kommunist’ and ‘MY’ for publishing information which discredited, compromised and brought shame on the President of Ukraine as the head of the state and citizen. And in spite of the inadmissible tone of the listed opposition publications, such actions of the President’s administration and General Prosecutor’s office should be interpreted as suppression of the freedom of speech.

One can observe that concerning human rights in our country the policy of double standards is applied: one standard for the international public and another for home use. Take for example the case of abolishing the death penalty. The Parliamentary Assembly of the Council of Europe considers the question of stripping the delegation of Ukraine’s powers not because some death verdicts were executed in Ukraine, but because the top officials of the country promised to introduce the moratorium on executions, but it has not been done. Another proof of the mentioned double standards is the absence of publications of texts of the international agreements on human rights, which were signed by Ukraine, in the official editions, such, for instance, as the ‘Chronicles of the Supreme Rada of Ukraine’. That is the main reason why there have been no precedents when courts based their decisions on the international agreements on human rights. Beforehand I protested when my colleagues asserted that it was done on purpose. I thought that they lacked financing, time and so on, but now I see that I was mistaken.

In general, frankly speaking, I recollect the feeling of enmity of the state to man, of the long forgotten counterposition we – they. I do not want to become a dissident again, but the drive is directed there.

What shall be done? I still believe that nowadays the only promising behavior for public organizations is the dialog with state organs. Human rights are declared as the highest value in the Constitution, and the state as a first duty has to realize and protect them. This can be a basis for joining efforts of state structures and NGOs. It can be done because the state stopped to be a monolith. In any state agency one can find officials who try to fulfil their obligations well. I do not want to be understood in such a way that everything connected with human rights is bad. Our country is one of the most tolerant in Europe with respect to national minorities and refugees, there are some signs of positive changes in the judicial system, sometimes the administration of the Ministry of Interior takes measures against torture, degrading treatment and tries to improve the situation. However, the situation of human rights observance, upon the whole, has significantly deteriorated.

Human rights – that is the immune system of the social organism. If one neglects the immune system, the body starts to ail and die. Any political regime which abuses human rights more and more is doomed. We must understand that either Ukraine will step by step turn a democratic country, where human rights are observed, or it will disappear at all, because internal strains will accumulate, and finally the country will burst, as the former USSR.

A new association

The Association of public organizations of Nikolayev region has been created in the town of Nikolayev. The Association unites 47 public organizations of different orientation. The association is intended to organize the intrarelations among the comprising NGOs and interrelations with authorities, business circles and mass media for solving social problems in the region.

The top priority directions of the Association are as follows:

• information and society;

The contact address of the Association: 35 Admiralskaya St., 327001, Nikolayev; E-mail address: vera@ngofsz.aip.mk.ua.

TACIS-Democracy programme

Sven Goldor, Adviser in political affairs

Representative office of the European Commission in Ukraine

TACIS-Democracy programme has been working in Ukraine since 1993. In the first years this programme focused its attention on establishing partner links between public organizations of Europe and Ukraine. This cooperation enabled us to fulfil numerous projects, among them the project of teaching human rights to the Ukrainian military. This project will finish this year.

In 1997 a new stage of TACIS-Democracy programme was started. So-called micro-projects grants were handed to local public organizations to assist their activities at grass-root level. The competition was severe, only 17 from 133 suggested projects were adopted, among them the projects directed at more humane treatment of minor criminals in Ukraine. Nowadays the most part of these projects are coming to the final stage. Now a new wave of grants for micro-projects has come, directed at support of Ukrainian public organizations in 1999. Handing of grants is controlled by the creative centre ‘Counterpart’ in Kyiv.

In future TACIS-Democracy programme will focus its attention on supporting micro-projects. We hope to support a larger number of Ukrainian public organizations than before. As to large joint projects, they will traditionally be an important part of TACIS-Democracy programme. Here the main attention will be given to few but larger projects with experienced Ukrainian public organizations that work jointly with European partners.

Requests to TACIS-Democracy programme for grants for micro-projects must be handed up to 15 December 1998. More details about the programme and the forms of requests can be received from Evgen Drobkov in the creative centre ‘Counterpart’ through the telephone (044) 29 59 707.

LEGISLATION

The moratorium on the death penalty must be made operable till January 1999

This is the demand addressed to the Supreme Rada of Ukraine by the Legal Committee of the Parliamentary Assembly of the Council of Europe (PACE).

According to the official data, the death penalty is sentenced but not executed in Ukraine since March 1997. Besides, the Supreme Rada of Ukraine adopted in the first reading the new Penal Code in which the capital punishment is replaced by imprisonment for life. If the demand of PACE is not fulfilled, the rights of the Ukrainian delegation at the next session of PACE will be questioned.

I.G., our informant

Anti-Communism contradicts the Ukrainian legislation

Roman Romanov, the Crimea

The idea expressed in the heading coincides with the opinion of the directorate of justice of Sebastopol.

Again the Ukrainian law ‘On unions of citizens’ has become an obstacle for NGO activities. The most serious drawback of the law is that it contains an exhaustive list of aims, for which an NGO may be created. The problem is aggravated by a restrictive interpretation of this list of aims by civil servants.

A public organization, the Popular Labor Union of Solidarists (PLUS) handed the application to the Directorate of Justice of Sebastopol, asking to register their organization. The response of the Directorate signed by G.V.Yaroshenia, the deputy head of the Directorate, read: ‘The aim of the PLUS activities is contradictory to Article 3 of the Ukrainian law “On unions of citizens“, in which connection Sebastopol Directorate of Justice may not register PLUS.’ The reason is that Sebastopol solidarists indicated as one of their principal aims the fight for overcoming consequences of the totalitarian Communist regime.

Since such an aim is not listed in the law ‘On unions of citizens’, the Directorate demanded from PLUS to drop this aim. PLUS refused to do it and has turned to the Ministry of Justice. Now we are waiting for the response. If we get a negative decision, we shall turn to higher judicial instances up to the European Court in Strasbourg. Our main argument is that Article 11 of the European Convention on human rights does not contain such a restriction on NGO activities as a Ukrainian law.

ELECTION - 98

Anti-Semitism during the election

L.Krichevskiy, Vinnitsa

Dmitriy Dvorkis, a Jew and the mayor of the town of Vinnitsa, sent the letter to President Leonid Kuchma asking him to stop the wave of anti-Semitism, instigated during the election by political rivals.

As a result of election-92 Dvorkis had been elected as the mayor of Vinnitsa. He did much for his native town. In 1996 the poll among journalists made Dvorkis the best mayor in Ukraine. The governor of Vinnitsa region is Anatoliy Matviyenko, the leader of the Popular Democratic party. He dislikes Dvorkis and using state owned mass media accuses him in misuse of power, without any concrete arguments. Leaflets are distributed in the town with the appeal not to admit kikes to power. Dvorkis is sure that these leaflets are distributed by the Popular Democratic party. Everybody knows that bad administrators in our country always look for the guilty, and the traditional suspects in this relation are Jews. That is a pity that their number in Ukraine is diminishing fast and steadily.

Leave the election or else…

S.Karnaukhov, Lviv

Many say that in the recent election the fight was carried by very dirty tricks. This opinion was confirmed by a sentence of the Zolochev court in Lviv region.

… A white ‘Zhiguli’-sedan moved from village to village in Zolochev district. The boss of the crew, Vladimir K., was the former head of the agricultural directorate, a candidate to the district council; beside the driver there were his two gorillas: Petro Migal and Ruslan Kachinskiy. At last Vladimir K. set the task:

• We are looking for Maria Homishin, the chairman of the cooperative union. She is also a candidate. We must ‘ask’ her to take off her candidature.

• Do you really want to be elected to Zolochev district council? – asked Migal gruffly.

• You’ll take off your candidature! – ordered Kachinskiy.

• If you want to live, – said Kachinskiy.

EDUCATION

Every other pupil goes to school without uniform

M.Roginskaya, Kyiv

Little Anya played hooky because she was not admitted to school. The reason was that she came without uniform. Anya’s mother was desperate: the jacket of the uniform costs 70 grivnas and her wage are only 50. All the pupils of Kyevan school No.267 were met by the watchman and head-mistress. That was she who ordered to send away ununiformed pupils. When asked about the reasons, head-mistress Svirida refused any participation in the act. She, by her words, just asked why the girl came without uniform.

Svirida’s colleagues from other schools were more sincere: We ‘press’ on parents because authorities ‘press’ on us. Deputy head of the Main Directorate of education does not hide that the Directorate wants all the pupils to wear uniforms. In central districts of the city 56,4% of pupils wear the uniform. Closer to the suburbs the number of uniformed pupils is little. The reason is obvious: more well-to-do people live in central districts. In the Ministry of Education the authorities understand it. One of them, Dmitriy Deykun, said:

• Secondary education in our country is obligatory and it is illegal not to let children attend lessons, if they do not have uniforms. Parents must know it and complain if school administration abuses this rule. A head-master may be fined or even dismissed for such arbitrary act. The uniform must be introduced step by step. This year wearing uniforms is compulsory only for junior graders, to whom the uniform must be given free if the parents cannot afford it.

ON BOTH SIDES OF PRISON BARS

Kremenchug: criminal statistics

Igor Pogorelov

According to the data from law enforcing agencies 19 murders were committed in Kremenchug lately, 18 out of them were disclosed.

221 case connected with drugs were registered. It is two times more than in the region and much more than in Poltava. Kremenchug pretends to be one of the most drug polluted towns of Ukraine.

How many people on the inside of the bars?

Ivan Shtanko, the head of the Penitentiary Department, informed that in 129 penitentiary establishments for adults, 11 colonies for minors (by the way, one of them – in Mariupol – is for girls) and 32 preliminary prisons 236,000 of convicts were kept on the 1 July. It is more than in Germany, France, Great Britain, Sweden and Bulgaria, rolled together. For comparison, five years ago the total prison population was 150,000.

The amnesty dedicated to the seventh anniversary of the state will decrease the number of incarcerated by 25-30 thousand. But one may be sure that the major part of the amnestied will soon return because they would have no job and no living accommodation at large.

E.Z., our informant

On efficiency of punishment of recidivists

S.Skokov, the head of the criminological laboratory of the University of Interior, Kharkov

Crime statistics shows that the recidivist crime in Ukraine grows steadily and has become a serious problem. In 1997 recidivists committed 74,406 crimes which is 61.5% more than in 1992. According to the forecast calculated in our laboratory the number of crimes committed by recidivists will grow up to 80,700. Unfortunately, this forecast is confirmed by the Ministry of Interior: in the first half of 1998 recidivists already committed 42,355 crimes, which is 21.7% of the total number of committed crimes.

As we see, most criminals are ‘new’, but recidivists are more dangerous because they promote crime in the population, spread criminal customs and traditions. That is why the struggle with recidivism was always regarded as one of the strategic directions of the activities of law enforcing agencies, while the study of the related problems was actual for juridical science.

Certainly the growth of the recidivist population on the bad side of the bars confirms the growing efficiency of law enforcing agencies. However, it also confirms the insufficient efficiency of incarceration as a correcting measure. Since 1991amnesties are held in Ukraine every year. There are two contradictory tendencies here: on the one hand, the state increases the fight with crime, on the other hand, the criminals are released. In 1997 as many as 31 thousand of convicts were released, this year, according to the data of the Ministry of Interior, at least 25 thousand will be amnestied.

A closer study of recidivists shows that the generalized image of a recidivist is not a terrible criminal, who should be kept behind the bars by all means, rather he is a quiet thief. In strict regime colonies of Kharkov region the proportion of thieves grew from 32.7% in 1992 to 49.1% in 1997. The most frequent term of punishment is incarceration from one to three years: by the end of 1997 they made more than one third of the total criminal population. Our judges hand out such punishments for pity thefts. For example, convict A. was given a three-year term for stealing cabbages from a vegetable garden (the material damage was estimated at 39 grivnas) and convict B. was given 17 months of incarceration for stealing several hens (the material damage was estimated at 53 grivnas). If one takes into account that the cost of upkeep of one convict per month exceeds 100 grivnas, one begins to think not only about juridical, but also about economic reasons.

It is naive to hope that a person after staying in a penitentiary establishment will reform. On the contrary, staying among criminals spoils a convict. Besides, after release one has many troubles in finding a job, living accommodation, etc. So a criminal commits the kind of crime he knows best and returns to the penitentiary system as a recidivist. So it is not surprising that in 1997 12.6 thousand people were sentenced for crimes which they committed during the first year after liberation.

At the international symposium ‘Searching alternatives to incarceration’ held in Kyiv in 1997 it was made public that for 100.000 population in Ukraine we have 450 convicts. In civilized European countries the proportion of convicts is less than 100. Taking into account that the Ukrainian population is decreasing and the number of convicts is increasing, recidivists will soon make a solid proportion of the population.

On principles of reorganization of penal-executive system of Ukraine

A.Stepaniuk, the head of the sector in the research Institute of studying crime

The following principles of reorganization of penal-executive system are suggested.

1. The development of penal-executive system must be based on the idea that within the penitentiary system there must be two distinct spheres of influence: of the state and of the society.

Roman Romanov, the Crimea

On 5 October 1998 Mustafa Dzhemilev, the chairman of the Medzhlis of Crimean Tartars, was given the award of the UNO Supreme commissar on refugees. The award was handed in the Palace of Nations in Geneva. The award was given for many years of Mustafa Dzhemilev’s activity aimed at the return of Crimean Tartars to their historical motherland. This award – Nansen’s medal – was first given in 1954, and since that time the award was given every year.

ARMY

Officers’ wives blocked the Kyiv-Chop highway

About two hundred wives of servicemen of military units dislocated in Novgorod-Volynskiy of Zhitomir region held a meeting, demanding to pay the salaries to their husbands, after which they blocked the traffic on the Kyiv-Chop highway. Law enforcing officers ‘explained’ to the women the situation, after which the block dispersed. For how long?

On creating a professional army

I.Sukhorukova, M.Shutaleva Kharkov

The problem of creating a professional army sooner or later appears before the country, which wants to have modern armed forces. Western countries solved this problem in different ways. The army of the USA and most European countries is professional. Mass armies turned professional after the WW2, when nuclear arms appeared, as well as other high technologies. To teach complicated technical professions to soldiers is very expensive, and the term of their service is short. The countries that passed to contracting servicemen argue that a professional army is cheaper than a mass one. Yu.Petrov, a Russian researcher, persists that a professional army is cheaper also because it does not require a special infrastructure, such as district recruiting committees with medical commissions (for example, their number in Kharkov region is 36), barracks, consumer services. A professional army is much smaller, it has less junior and senior officers.

However, there are well-developed countries (such as Germany or Israel), where the armies are shaped on the basis of the total recruitment. Still, there are many peculiarities in such armies. In Germany the principle of territorial service is adopted. Soldiers serve in the army as a rule in the town where they live, and they return home in the evening as after a normal job. Besides, a democratic law on alternative service operates and the defense tax is introduced for those who do not want to serve in the army.

The Israeli army is non-local but all the servicemen spend two days a week at home (the country is small and every car driver usually gives a lift to the ‘children’). The country has a wide system of privileges for those who served in the army. The people who served in one unit unite in clubs and continue to mix socially. ‘Dedovshchina’ is practically absent, although some elements of it are imported by the former Soviet citizens.

Why do we believe that Ukraine needs a professional army? First of all, the Ukrainian army has a number of genetic drawbacks inherited from the Soviet army, magnified by the economic crisis and general ideological confusion. The army of the former Soviet Union was the largest in the world in absolute numbers (5.5 million) and second in relative numbers (1.9% of the total population, while the army of the North Korea is 4%).

The Soviet army suffered from dedovshchina and was a great load for tax payers, since the expenditures were large and weakly controlled.

A professional army in Ukraine which would be organized on the contract basis could give an opportunity to select morally and physically healthy young men and destroy dedovshchina. According to Russian researchers Yu.Petrov and O.Velenskaya, a professional army in Russia could soon become cheaper for the country that a mass army.

Nowadays the problem in Ukraine, according to military experts, is the absence of the primary capital for starting the reform. Nonetheless, the reform can be carried out step by step, beginning from building, convoy and frontier guard units. Repeating the experience in Germany, the defense tax can be introduced for those who do not want to serve in the army. The law on the alternative service should also be modified in order to account for the rights of pacifists and concord with the Ukrainian Constitution. Leading economists of our country are to calculate and compare the expenditures for the existing army and for a professional one. Such investigations are to be published, so that the public could decide what we need. What we want to have: the present army with dedovshchina, with soldiers the majority of whom does not want to serve and massively desert, with servicemen who are physically and mentally ill? Or we want to have high-tech armed forces where servicemen have high professional level, responsibility and dignity?

MEDICINE

Open letter

We have received a copy of the open letter about former crimes of psychiatrists from the notorious Dnepropetrovsk special psychiatric hospital. It can be of interest to our readers.

Mr Les Taniuk

People deputy of Ukraine

Head of All-Ukrainian ‘Memorial’ society

Much-esteemed Les Stepanovich!

Ten years have passed since establishing in Moscow, and then in Kyiv, the ‘Memorial’ movement, initiated by academician Sakharov. But the important direction of fighting the penal psychiatry is practically ignored. All the executioners of the notorious Dnepropetrovsk psychiatric prison, who sent their victims to hell, have retained their positions or made carriers in the post-totalitarian time. If we, ‘Memorial’ members, cannot attract to criminal responsibility successors of Dr Mengele, then we at least must inform the public on all the terrors of Dnepropetrovsk psychiatry by creating on its premises a museum. And let there be names of the henchmen engraved in black letters and their victims’ names – in red.

V.Ochakivskiy, head of Aleksandriya branch of ‘Memorial’

RELIGIOUS LIFE

Persecutions for religious beliefs are resumed

Ilya Strelkin, Moscow Helsinki Group

On 29 September 1998 at 10:00 hours a trial on the liquidation of Moscow religious community ‘Witnesses of Yegova’ started in Golovinskiy court of Moscow. This is a political, not a juridical trial, and it signifies resuming repressions for religious beliefs in Russia. Such is the opinion of leading Russian and foreign human rights protectors and lawyers. In order to make their position known to the public they held a round table on 23 September in the Central House of journalists. Moscow Helsinki Group, the international organization ‘Human right watch’ and the public movement ‘For the freedom of consciousness and secular state’, representatives of Russian and foreign mass media, members of the USA, Canada and Romania Embassies were present.

Participants of the round table demanded:

1. To stop the persecution of ‘Witnesses of Yegova’.

2. To start the criminal case for the investigation of illegal actions of the claimant – the prosecutor’s office of the Severny administrative district.

V.D.Nikolskiy, the executive director of the public movement ‘For the freedom of consciousness and secular state’, attracted attention to the scandalous activities of the claimant – the Committee for salvation of youth from totalitarian sects. The lip service on the salvation of youth is just a curtain intended to hide the avid intention to grab the property of the religious organization. It is confirmed by a fantastic demand of compensation for moral damage – 200 billion rubles and by started clashes for sharing this compensation.

This Committee for salvation instigated the case, which was stopped four times because of the lack of any facts confirming the alleged crime. However, undercover pressure was exerted and the trial has started. The source of the pressure is still to be elucidated.

V.A.Kikot, an adviser of the Constitutional Court of Russia, who was present at the round table as a private individual, spoke on the mechanism of abusing the freedom of consciousness. He said that the Constitution of Russia guarantees the freedom of consciousness on the level of the European Convention on human rights. But the new law ‘On freedom of consciousness and religious organizations’ already puts forward several religions as traditional in Russia this already enables bureaucrats to infringe upon the rights of Russian citizens, members of religious minorities.

V.M.Kalin, the coordinator of the administrating center of ‘Witnesses of Yegova’ in Russia, reminded that ‘Witnesses of Yegova’ had been repressed in the former USSR, when thousands of them were exiled or incarcerated for many years. Since 1991 they all were rehabilitated as victims of political repressions.

The European Court on human rights more than one time considered cases connected with ‘Witnesses of Yegova’ and every time decided the case in their favor.

WE REMEMBER

25^th Day of political prisoner

A.Daniel, S.Lukashevsky, Moscow

30 October 1998 is the 25^th Day of political prisoner. In 1974 this day was selected by political convicts of Mordva and Perm concentration camps to keep the memory of the victims of the totalitarian regime of the USSR and protest against current political persecutions.

The first 15 years this day was ‘celebrated’ by one-day hunger strikes of political prisoners in Mordva and Perm camps, in Vladimir and later Chistopol prisons.

Exactly 10 years ago on this very day the preparatory conference of the ‘Memorial’ society was held. This day, 30 October 1988, was marked by another event – a brutal dispersal of the mourning march to Kuropaty, the place of the burial of victims of mass executions.

A year later another memorable action was held: ‘Memorial’ activists surrounded the building of KGB in Lubianka with a living chain. The people held burning candles as a sign of memory to victims.

Next year on the same day the enormous crowd gathered in Lubianka and the Solovetskiy stone was laid – up to now the principal memorial to the victims of the totalitarian terror. That year the stone was still in the same square with Dzierzinski statue.

At last in October 1991 the Supreme Soviet of Russia officially proclaimed 30 October the Day of memory of victims of political repressions in the USSR. The same time the Supreme Soviet practically unanimously adopted the law ‘On rehabilitation of victims of political repressions’. ‘Memorial’ experts took part in the development of this law. Then it seemed that our country reached consensus about historical, judicial and moral assessment of the state terror and the necessity of liquidating its consequences. Then it seemed that the struggle begun by Soviet political prisoners in 1974 was crowned by a victory.

Certainly, the law of 18 October 1991 could not solve all problems at once, especially in the part that concerned the full restoration of the legal rights of citizens, who suffered from repressions, and about recompensing their damage. In later years some amendments were introduced into this law and related legal documents. ‘Memorial’ took an active part in all these processes, successfully lobbied the interests of the repressed people.

However, the life has shown that we celebrated too early. The climate is becoming stiffer. The first alarm sounded on 4-5 February when the State Duma discussed budget-98 and on 16 October, when the subsequent corrections and amendments to the law ‘On rehabilitation of victims of political repressions’ were discussed, the new tendencies in the assessment of the state terror and problems of its victims, became quite clear.

The working collegium of the ‘Memorial’ society and the editorial board of our information bulletin would prefer to celebrate the 10^th anniversary of ‘Memorial’. But it is too early to celebrate.

ADVERTISEMENTS

The publishing house ‘Osnova’ in Kharkov printed a book by Aleksandr Borovitinov titled ‘Blessed be the peacemakers’ (234 pp., paperback). This is a piece of fiction which tells about a young man, a pacifist by his convictions, who tried to dodge army service. We remind a foreign reader that any alternative service is permitted in Ukraine according to the law of December 1991, provided that the pretendent brings a certificate from some religious community. This law does not admit ‘free-lance’ pacifists. The hero of the story has long and complicated conflicts with the authorities and finally resolves his problem. The book can be ordered from the address of Kharkov Group for human rights protection.