One year at the helm or salmon Day

“Wow! Same old faces, same old song!” said Ukrainians one year ago, watching Viktor Yanukovych, Nikolai Azarov, and others regaining their seats in Cabinet after the Orange parties failed to form a coalition. Now, one year later, people have the same feeling, seeing that nothing has really changed: the roads are still bad, the country is still plagued by larceny, and everything is still going wrong.

Remarkably, in spite of and in defiance of the political crisis and with the parliament in limbo, the national economy is alive and kicking. This was the tenor of Yanukovych’s summary report and the leitmotif of his book One Year at the Helm. Viktor Yanukovych: From Crisis to Economic Growth. The title of his first book was One Year in Opposition. At a closer look, both are strikingly similar to Leonid Kuchma’s literary work After Maidan.

Below are some remarks on Yanukovych’s report.

…Our government came to power in order to meet the terms of the contract, in which the contractor undertook to serve society to the maximum benefit of the state.

V. Yanukovych. August 18, 2006

On the eve of its anniversary, the government gathered for a session to report on its “service to society to the maximum benefit of the state”. The Prime Minister’s speech was brief and stern. In the beginning he noted August 4 as “a remarkable date” (in Sakhalin it is Salmon Day, but to Ukrainians there is hardly anything remarkable about it). Yanukovych said that August 4, 2006 would “go down in history as the dawn of a new model of government that put an end to the authoritarian legacy and created prerequisites for responsible implementation of much needed reforms”.

As Yanukovych said later, “the executive branch has been trusted and supported by the majority of voters”. That, however, contradicts factual figures: in the 2006 election the three coalition parties collected a total of 41.49 percent of votes; according to opinion polls conducted in the past year, the level of popular support for the Yanukovych government barely reached 10 percent and for Yanukovych personally – 31 percent.

According to the results of a special monitoring poll conducted in April-May, 61 percent of Ukrainians described the situation in the country as “bad” or “rather bad”. Nearly every second respondent (49 percent) said the situation had changed for the worse under the ruling coalition headed by Yanukovych; 38 percent saw no changes at all; and seven percent saw changes for the better. Changes for the worse since the coalition government took office were noted in each area and sector listed in the questionnaire.

The Prime Minister further told about the dark past inherited from his predecessors, the agreeable present built by his team, and a bright future. There was nothing new in the report. Any phrase –about the past, the present, or the future – sounded exactly like those heard many other times in 15 years.

The Past: Traditional Vilification of Predecessors

At the very first session of the Cabinet I warned everyone against vilifying our predecessors.

V. Yanukovych, August 10, 2006

A summary report is supposed to convey achievements and credibly explain imperfections. Yanukovych’s predecessors had always been an easy scapegoat– the parliament that “put spokes in the government’s wheels”. Now that his government and parliament were “a single whole”, the predecessors come in handy. “Having analyzed the economic situation, we saw that the ideology of social populism used by our predecessors had exhausted the economy and led to a number of acute problems.” Yanukovych was right in saying there were acute problems, but the words “exhausted economy” didn’t quite agree with his next phrase: “In the first five months of our government, the economic growth rate reached 8.3 percent.”

How come? Didn’t Yanukovych say that when his government took the reins the national economy was in such a bad exhausted by the ideology of social populism? What on earth could spur on an exhausted economy to gallop at such a speed? More reasonably and logically, such an impressive growth rate could be explained by inherited inertia. Yanukovych attributed it to “effective implementation of the anti-crisis program”. Nobody has ever seen that program, though.

Tradition One: Fight against Corruption

I am deeply concerned about corruption that ordinary citizens come across in every corner – in such sectors as health care, education, public utility services, and others.

V. Yanukovych, One Year at the Helm

Yanukovych titled one part in his report poetically – “Seven Pillars Supporting the Sky of Freedom”. Pillar number three was “relentless fight against corruption”. Again nothing new: each of his predecessors had fought corruption just as relentlessly. The only difference this time was that he listed it among the problems yet unsolved. “It is very hard for our government to fight corruption.” Yanukovych is perfectly right. So was Professor Preobrazhensky [in Mikhail Bulgakov’s The Canine Heart – A.B.] who said, “It’s very hard, indeed, to beat your own head.”

There is an interesting nuance in what Ukrainian top officials say about corruption: they all admit that it exists, but it is somewhere “out there” – not in their offices. Yanukovych is no exception: admitting to this disgraceful phenomenon in most sectors, he lays the blame on regional and local authorities. “I have a lot of critical remarks to the governors and other local officials… The level of corruption in the regions is very high…” It never even seemed to occur to the Prime Minister that corruption could be somewhere in the government building.

Ordinary citizens, however, have a different view: 23 percent of them noted corruption at the local level (among doctors, teachers, house managers, local authorities, etc.) as among the most pressing issue while 47 percent noted corruption in the higher echelons of power. Local-level corruption rated eighth in the list of Ukrainian’s socioeconomic problems – next to “authorities’ indifference to public opinion”. Ukraine is a free country –people can think whatever they want. They might even doubt that there is corruption within the main decision-making body – the central government.

It is not a coincidence that since January, 5,126 officials have been charged with corruption and a mere 0.09 percent of those cases involved officials from the central government. The problem must be in the Ukrainian law enforcement system as a whole. Prosecutors and police brass think of the Prime Minister not as ordinary people do: “to serve society to the maximum benefit of the state”.

The Future or Tradition Two: Ifs

This country deserves a bright future and will certainly have it if…

Yanukovych has only two “ifs”.

The first if is if “Yanukovych and his government stay in office”. Then the widely advertised but unknown “mid-term reform program” will certainly succeed, making Ukraine “a competitive European country”.

The second if is if “Yulia Tymoshenko, social populists, and other fault-finders don’t stand in the way”. According to Yanukovych, those fault-finders forget that after the collapse of the USSR, Ukraine inherited “just fragments of a once integrated economic system” and still has to put them together. They turn a blind eye to evident changes for the better. They claim to be well-read but they don’t know that the problems this government is trying so hard to solve have no historical precedents.

Yanukovych writes the following: “In accordance with the historical laws of sociopolitical development, gradual maturation of a market economy always preceded and catalyzed the establishment of a democratic form of government… In this historical context, Ukraine’s efforts to build democracy and a market economy at this time alter the established model of correlations between economic and political transformations that normally take centuries. Without question, these transformations have no historical precedents, and those that criticize us should not forget it…”

This passage above is a verbatim excerpt from an article by Russian author Grigoriy Weinstein (except for the “post-communist countries” being replaced by “Ukraine” and the last phrase about criticism). Moreover, the same idea was reiterated three times in Leonid Kuchma’s new book. As we can see, plagiarism is becoming another tradition in Ukraine – this case is not the first…

Tradition Three: Social Populism

The government places emphasis on the social-liberal character of reforms. We are convinced that economic reforms can and must benefit the broadest sections of the population.

V. Yanukovych. April 13, 2007

Yanukovych often uses the term “social populism” in an abusive sense, but he claims to care for the broadest sections of the population. He has even promised them “a better life for all now”.

Actually, it is an old tradition with those in powers to call one another names like “social populists” while engaging in social populism at the same time, especially before elections.

The government’s account read by Prime Minister Yanukovych is a perfect example of reservation and consistency: first economy, then wages, and no populism. “Having secured positive economic indices in the first quarter, we began to raise salaries and pensions stage by stage.” According to the Prime Minister, his government has raised salaries nearly 25 percent and pensions by 20 percent, reduced wage arrears by 20 percent, and has increased budget outlays for social programs almost threefold; by October it plans to raise salaries to budget-funded employees by 50 percent. The unemployment rate stands at a mere 2.6 percent – the lowest in all of these years; the number of job-seekers has dropped by 15 percent.

Yanukovych complains that the Orange opposition won a lawsuit against his government (which is going to cost UAH 70 billion [$14 billion – A.B.] in welfare allowances and privileges restituted by the Constitutional Court). The government suspended or abrogated 67 legislative acts, but it would be unjust to blame Yanukovych for that. Firstly, the opposition factions also voted for the 2007 national budget that suspended or annulled other legislative norms. Secondly, to suspend legal acts with a budget law was not something of Yanukovych’s invention. It was Viktor Yushchenko that started this practice: he suspended more than 30 legislative norms while drawing up the 2000 national budget. Thirdly, it is clear to everyone, including those that receive welfare allowances, subsidies, privileges, etc. that social policies based on such payments is not even social populism – it is an insult to the common people and common sense and a big trough for those that “serve society to the maximum benefit of the state”.

The maximum benefit is not in alms but in adequate labor remuneration. Every able-bodied citizen has the right to a decent job and adequate remuneration. Every employer has the guarantee of inviolability of property. Every working person has the right to feed and support disabled members of his/her family, cat and all.

Social allowances should be paid to disabled citizens if they have no one else in their families to support them. The system of privileges, subsidies, allowances, and other payments to able-bodied citizens is abnormal: paying its citizens less than they actually earn, the government treats them to handouts. Who gains? – Of course, the host of public servants that distribute those alms (and so they can pocket a little here or there). Their political color – orange, blue, or pure white – doesn’t really matter.

According to ILO data, Ukraine rates as the third last among European countries in terms of adequate labor remuneration, just a few points above Moldova and Albania. Hence it is the poverty of most employed citizens that disappoints Yanukovych so much. He reasons that those that work cannot be poor by definition and he is right, but what of it? He promises to look into the matter, put everything in order, and raise living standards “through an extensive and systemic dialog between authorities and businesses”. His oral promises are nothing new to ordinary taxpayers – just another tradition like the much reiterated pledge of fighting corruption.

Tradition Four: Protection of Domestic Producers

As a result of the previous governments’ irrational policy for liberalizing imports, domestic producers were ousted from the Ukrainian market and the foreign trade balance was askew. We have not managed yet to overcome these obstacles.

V. Yanukovych. August 1, 2007

The unbalanced trade balance is not the only thing that jars the ear. Why is Yanukovych so concerned about liberalized imports and not the widespread smuggling business that is harming domestic producers much more? Or does he mean that the liberalization of imports impedes Ukraine’s accession to the WTO?

His report did not even mention purchases by the state treasury [A1] blocked by his government. Does it mean that the Prime Minister doesn’t care about that?

Yanukovych said, “Our task is to make the economy work primarily for the domestic market; to make this market expand on Ukrainian-made products; to make budget spending stimulate domestic producers through increasing consumer demand.” The task is correct, but the subject-object correlation is wrong: it is increased consumer demand and revenues to the budget from increased incomes that should increase budget spending.

Firstly, consumer solvency is the main prerequisite for the development of any national market. The plethora of budgets and social funds are but breeding grounds for embezzlers.

Secondly, one authoritative Ukrainian economist was right saying that “the poorest sections of the population spend their income on essential commodities, most of which are imported and very often smuggled in. Besides, their salaries are raised so insignificantly that they simply change their social status from “poorest” to “poor”.

It is common knowledge that inflation cancels out any pay increases. Still, Yanukovych keeps bragging that salaries have been raised 20 percent in three stages.

According to the State Statistics Committee, last year the average monthly income per capita was UAH 675.3 [$130 – A.B.]. Between January and June of 2007 it grew by 1.3 percent – up to UAH 665.6 [$132 – A.B.]. The monthly subsistence minimum was UAH 472 [$93 – A.B.] last year and now it is UAH 561 [$111 – A.B.]. The difference is barely enough for the poorest to become just plain poor.

Between January and May, Ukrainian citizens spent 84.2 percent of their income on goods and services, saving only five percent (two percent less than last year). In other words, they ate up almost everything they earned (to be more exact, they were paid just enough to make ends meet). According to the latest sociological survey, 40 percent of Ukrainians buy foods in stores and 48 percent buy them in markets; 71 percent buy footwear and clothes in organized markets, five percent buy them in secondhand shops or stalls, and only ten percent buy such goods in department stores, trademark shops, or boutiques.

If salaries increase enough to reverse this trend, then domestic production would grow, too. If the average Ukrainian citizen received enough to afford a separate flat, then five more people would have a job…

Universal Tradition: All Are Equal before the Law, But…

Our team has always abided by the principles of lawfulness and openness to society.

V. Yanukovych. August 1, 2007

It is an undeniable fact that the Yanukovych government has achieved more during the past year than the Orange team had achieved in its eighteen months in office. Almost all players in the Blue team are well-disciplined. They play their game without discussing or changing the rules and always meet deadlines, and their speakers are good orators. Their methods, however, “lack refinement”. They are like a bulldozer that keeps rolling over everything in its way.

Yet, there are some questions. What did Yanukovych promise Russians in exchange for “cheap” natural gas? Why does the Foreign Ministry and the Finance Ministry know nothing about the “intensive gas talks” in Moscow? Why are real gas transit schemes known to the Russian security service and not the Ukrainian SBU? How much do Ukrainian businessmen have to pay to get their VAT reimbursements? Where is Yanukovych’s income statement for 2006? Does he know that he violated the law by withholding his income? He surely does but says, “From my own experience of being in the opposition, I know how important it is for people to have free access to truthful and balanced information.” Now, when he is in charge, no member of government is allowed to divulge any details of Cabinet meetings without his approval. Is this what he calls “freedom of speech”?

Instead of Anniversary Compliments

The challenge confronting Ukraine today is the ability of political forces to unite around a common goal and ways of achieving it.

V. Yanukovych

Sooner or later, our political leaders will unite around a common goal because their business interests are tied in a very tight knot and because they are so alike, even though they are at loggerheads with one another in public.

On one hand, the most conspicuous political leaders have different goals. Yanukovych wants stability and a market economy; Tymoshenko wants justice; Yushchenko wants to live in Mariinsky Palace. On the other hand, they all want stability when they are at the helm and cry for justice when they are not, and they all want to live in palaces.

The main challenge facing Ukraine today is the ability of common people to unite around common interests. It never really matters for a democracy whether it is a republic or a monarchy, a presidential or a parliamentary republic. It doesn’t matter who is highest man on the totem pole – the president or the prime minister. What does matter is the people that delegate this authority.