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 26 June 2004

Kuchma’s new course is as important for Ukraine as Roosevelt’s New Deal was for America. 

From the newspapers, November 1994

Don’t get me wrong. This article is not about the upcoming elections. It is a reminiscence about the previous ones. It has been 10 years since Leonid Kuchma was elected President. 

In that remote past, especially following his strategic speech in Parliament entitled “The Course of Radical Economic Reforms”, many compared Kuchma, seriously and hopefully, with Franklin Delano Roosevelt (FDR), and his course of “radical economic” transformations with the famous New Deal.

The only thing that remains of those days now is Kuchma’s own book “Ukraine is not Russia”, which appears to be meant to show a Ukrainian Roosevelt to the world, so many are the analogies and borrowings.  However, the author complains, those who rock the boat in Ukraine – Parliament, the opposition, media – prevented him from becoming the Roosevelt of today. 

Comparisons are odious, so there is no good putting the American and Ukrainian presidents side by side. Yet the ways of overcoming crisis applied in America of the 1930s and in contemporary Ukraine are comparable. 


“I wish we, Ukrainians,…”

The major factor that helped us ride out the crisis was not even the growth in production…it was à crucial change in public sentiment. 

“Ukraine is not Russia”, P. 459

“What caused a shift in public sentiment in America of the 1930s? – asks Leonid Kuchma in his book, and offers his interpretation of plausible reasons. It was positive thinking, common values, optimism and patriotism. All were united: church ministers, newspapers, radio (there was no television yet), Hollywood. The opposition did not speculate on the social protest potential in order to rock the boat. I wish we, Ukrainians, could learn this lesson from them.” Indeed, why don’t we stop rocking the boat?

I feel as if this question were addressed to me. And I feel I should answer it, although my response will not change anything. I am sure Mr Kuchma, the authors of his book, his entourage, aides and advisors know fairly well what Roosevelt did in America in the 1930s and what they ought to do in Ukraine today to inspire positive thinking, optimism and patriotism and to promote common values so that the poor boat could finally be balanced out…  

First, the whole might of the state system should serve to protect the “humble citizen” (I quote Roosevelt). Officials representing the state system should learn at least to tolerate, if not to like, everything related to the citizen, i.e. Parliament, the opposition and the media criticizing those officials.  Without such institutions, the citizen has no voice. The state system should also include an independent judiciary and the Bar, which Leonid Kuchma never mentions in his book among the principal boat-rockers, presumably because the two latter institutions simply do not exist in this country.

Second, those in power should keep their promises, i.e. not only pass legislation (adopt programmes, deliver addresses, make speeches, etc) but enforce it as well. They should not lie to the people, misrepresent facts and indulge in demagogy.

Third, they should steal less. 

That seems to be it. 

A powerful ideology of the American Dream was not reduced to proclaiming banal truisms like: virtue is always rewarded, vice is always punished, work to fight the evil and you’ll be given your due. Invariable happy ends in the movies were endorsed with practical results in real life. 

Roosevelt did not only declare common values in his interviews by the fireplace, but propped them up by introducing aid to the unemployed in the state of New York where he was governor. When, following two years of implementation of the “poverty alleviation” policy by Hoover’s administration 4 million Americans lost their jobs,  the state income tax was raised by 50% (but only on high incomes), allowing them to increase the  dole to USD $23 per household (whereas the other states paid as little as USD $2-3).

Not only did Roosevelt announce his New Deal, he worked hard on its execution. As a result, in 1935 the official US industrial production index exceeded that of the pre-crisis year of 1929 by 1%.

It is true, the Hollywood movies of that time featured residents of small towns, workers, unemployed, honest rank-and-file policemen, rather than “cool guys”. Yet while the 1934 movie “Our Daily Bread” highlighted the benefits of collective farming for broken farmers and jobless workers, in real life the government was implementing a federal programme of subsidizing farmers’ resettlement to encourage setting up collective farms. I repeat, emphatically: collective farms! It is also true that 10% of American farmers went bankrupt in the course of the New Deal realization. But for one thing, it was only 10% (not 90% as in the case with Ukrainian agrarian workers), and for another, newly established collective farms saved them, as after 5-6 years of working at such farms, the formerly insolvent farmers earned enough either to move to cities where industry was ready to leap into prosperity, or to start their own business. By that time, a new category of movies had appeared focusing on the need for and feasibility of organized labour…

Law and order triumphed on the screen. Concomitantly, in real life, the Federal Bureau of Investigation and Government Men were organized under the Ministry of Justice, and the war with gangs that was smoldering at the local level gained new momentum, new forms and scales. A romantic gangster was replaced with a G-man whose credo was: crime does not pay.   

The key point of the New Deal was not a verbal statement of common positive values. Nor was it the adoption of an effective legal framework, including the vital National Industrial Recovery Act. It was the rigorous enforcement of adopted legislation. Only 11 social laws were passed and implemented in the New Deal times, but they helped America out of the crisis.

If we made a pile of all the socially-oriented laws, decrees, resolutions and programmes adopted in Ukraine, the stack would be taller than the Statue of Liberty. Yet what’s the use? They were, are and will be drafted in order to keep the bureaucrats busy during their working day, rather than to be implemented. 

Roosevelt inherited a country with a very similar situation. Most of us mistakenly believe that the pre-Depression America was a cohesive, potent and wealthy nation. Some experts argue that if Roosevelt had been free not to interfere with the “natural course of events”, the Depression would have been overcome much sooner and perceived as a common cyclic recession.  I do not think it sensible to apply the notion of “natural course of events” to socio-economic processes, particularly of the 20th century. But we will discuss that later. 

As for stealing less, I will give you two historical examples. Garry Hopkins worked in Roosevelt’s administration for 12 years (in a position very similar to Dmytro Tabachnyk’s). All those years he received a lower salary that at his previous job at the New York TB and Health Association. While serving his term in office, Hopkins was authorized to spend USD $9 billion and to oversee the spending of many more billions of dollars under the Lend-Lease Act. However, he made no fortune to bequeath to his heirs.

Another example: wishing to bring order to the stock exchange, Roosevelt persuaded J. Kennedy Senior to run it for a year. A year later the stock exchange functioned like clockwork, and Kennedy handed in his resignation to Roosevelt. The President requested that the old man work for the federal government – for the department of trade this time. Kennedy declined, referring to his delicate health, homesickness and what not, but Roosevelt insisted. So Kennedy had to admit he had lost USD $100,000 over the preceding year and did not want to lose any more. Managing the stock exchange, he did not consider it appropriate also to engage in private business and, thus, he was losing money. 

Roosevelt himself explained his reluctance to run for New York governor in 1928 due to financial hardship and concern that his income would be reduced should he become governor.

I do not know of a single official in Ukraine, governor or any other functionary, who would refuse to assume positions of power for fear of diminishing incomes. On the contrary, they all expect to profit from their official posts. 


In our times, or, life has become more exciting

Today, eleven years after Ukrainian independence was declared, everyone would agree that life has become more exciting.  It is true, but it needs specifying. Life has become more exciting for the cheerful, enterprising and daring, for those who are not afraid to live. 

“Ukraine is not Russia”, P. 468

The theory of “exciting life for the daring, etc” is not even the “market fundamentalism” or “market bigotry”, for which Kuchma upbraids the anonymous “Ukrainian leadership of 1991”, it is social Darwinism, an  obsolete, disproved doctrine. The people who wrote the President’s book are fully aware of it. Although they try to avoid any reference, each phrase is suggestive of Messrs Spenser and Samner’s ideas. Boiled down to its core, the doctrine claims that natural selection laws are as applicable to society as they are to wildlife; the fittest (cheerful, daring) survive; no one can interfere with the natural course of events, otherwise society will collapse.  

A simple, foul and hypocritical ideology. What kind of non-interference into the “natural course of events” is it when, say, the Artemis Distillery gets tax benefits or a profit-making state-owned enterprise is privatized dirt-cheap by God knows whom?

On the other hand, what kind of interference is required in order to introduce sound taxes, i.e. to reduce taxes on low incomes and raise them on high incomes? And to do it before imposing horizontal (general) taxes on, as Hopkins put it, “every working man buying every pair of boots”.  

In the New Deal times, the income tax rate for incomes of over USD $50 thousand was 31%; for incomes of more than USD $5 million – 78%; the real estate tax was raised to 70% (cf: senators’ salaries were about USD $2000 per year). Levying taxes on the American “daring”, Roosevelt explained:  “We do not mean to do away with the rich; we want to create broader opportunities, restrict unhealthy, aimless accumulation of capital and distribute the government’s financial burden more efficiently”. My President will not either impose sound taxes or explain it to the citizens.  

Roosevelt, unlike our head of state, did not despise Marx’s style, nor consider “Capital” an old-fashioned book. What interested Roosevelt in Marxist theory was not the dubious idea of sharing wives, but the main controversies of capitalism, which Marx expertly described. Roosevelt often spoke about one of them, namely the conflict between the social nature of production and private nature of appropriation.

What is this about? It is about a situation when, for example, Kryvorozhstal [Kryvy Rih Steel Works] gets funds from the state (i.e. society’s) budget, but the proceeds from this steel are privately appropriated by Mr Pinchuk and Co.

When numerous advisors recommended that Roosevelt wait with reforms until the governmental machine came to a total standstill, he riposted: “People are not cattle, you should know that”. And he acted promptly.

Mr Kuchma’s perception of people and the urgency of reforms is different. Not only did he not act promptly and radically, he tries to prove in his book that inactivity and delayed reforms is wholesome for the country: “Contrary to the common opinion, I do not regret that reforms in Ukraine are somewhat delayed… It is important that people be given some time to get accustomed to each stage of transformations, to come to terms with them. Thus it would be more accurate to speak about a shock-absorption rather than the reform slow-down. I cannot imagine a family being evicted from their flat for not paying the rent for three months, as they do in the Baltic States. Let alone the rent itself, which has been raised manifolds in those countries whereas we raise it gradually, by a couple of per cent!  I do not doubt we will resolve all our problems in Ukraine. We will do it more slowly, perhaps, but in a more humane fashion.”

Isn’t it in line with Bernstein’s philosophy: the process is everything, the ultimate goal is nothing.  The above quotation testifies either to Leonid Kuchma’s absolute ignorance or his professional skills in juggling the facts. Can our head of state be unaware that in Ukraine families are sold together with their flats in houses that used to belong to enterprises? Can he, given his technical background, have never figured out what share of household incomes goes to pay rent in the Baltic States and in Ukraine? Finally, the President has not raised the rent for quite a while now – he delegated this challenging function to local governments five years ago.

What is worse, our head of state did, indeed, allocate ample time for “getting accustomed” to vile politics, pauperized living standards and spiritual squalor. And he does not care a straw how I, the citizen, might feel about it.  

I particularly like one military document adopted in the Roosevelt era. It is entitled “Joint Chiefs’ Opinion on the US General Production Programme”. One of its paragraphs reads as follows: “Although the United States is going to bear the burden of military effort for a long period of time, the weight of this burden should boost the civilians’ morale and will to win”. This was written in 1941, before the USA entered WWII.  They were thinking about how to bring the war burden in line with the people’s morale. I wish we, Ukrainians, …

A bit of biology, or, on freedom of speech

Freedom of speech and journalists are amongst the social phenomena (alongside Parliament and the opposition) that Leonid Kuchma dislikes most strongly. 

I do not know if the authors who wrote sections on the press for his book have ever read R. Sherwood’s works, but I was amazed to find certain allusions in the President’s manuscript. 

According to Sherwood, the aforementioned Hopkins hated it when the press attacked the New Deal and FDR. However, he never gave up his firm belief that this freedom of attacking himself or anybody else in the press produced “the red blood cells which bring oxygen to the vivifying tissue of democracy.”

Commenting on the press attacks, Leonid Kuchma concludes: “I view them as something like white blood cells, the presence of which testifies to a crisis in the body. Then the disease subsides, the white blood cells disappear and nobody misses them”.

What looks red to some people, looks white to others. What is oxygen to an American, is malady to my President.  

That is why my country has censorship, “temnyks” and Serhiy Vasylyev. And if those who try to bring in more oxygen lack understanding of what is expected of them, blood cells may turn into corpses. In my country murders of journalists are not prosecuted, they are appointed.

My country is the only European state described by Freedom House 2003 Report as a nation moving away from democracy. The list of “Countries at the Crossroads” contains 30 states where democracy has not become irreversible yet…

My President does not read newspapers, following his friend Boris Yeltsin’s advice: “Read less what they write about you, and listen less to what they say!” Roosevelt, on the contrary, started his day with reading newspapers, especially those which were most critical of him and his New Deal.

In his 1937 State of the Union Address to Congress Roosevelt argued: “Five years of heated discussion – five years of information through the radio and cinema – have taught our people to think about the nation’s affairs. Those who criticized our goals most vigorously encouraged our citizens to think of these goals, understand and accept them. In this discussion we have learnt to think as a nation”… Only after the New Deal did America become the unified and powerful country that we all know today. It happened because the “humble citizens” approved of Roosevelt and his cause and because the media were free to voice concerns and disagreement with whatever went wrong. 

One should not think Roosevelt’s course met no resistance. Thus, in 1931-1932, a fierce campaign called “Stop Roosevelt!” was launched inside his own party. The Democratic press contributed to it as well. Rumours circulated that FDR had syphilis, rather than poliomyelitis, that he was a petty thief who had stolen post stamps from his friend-collector, etc, etc, etc.  

Was there no crime or shadow economy? There were gangs, mafia, corruption and prohibition, with all attendant circumstances.

Was there no opposition to confront Roosevelt? He had to withstand the counteraction of the Congress, Republicans, opposition from within his own party and the Supreme Court that in 1935 repealed as unconstitutional all the bills he proposed as an underpinning for the New Deal.  Roosevelt settled the issue with the Supreme Court later, although not to seek their permission to run for another term… 

When Leonid Kuchma was elected President of Ukraine he had neither opponents nor adversaries, I mean open ideological challengers. All political forces, except for the Communists, supported him.

It was the right moment for the President to initiate, back up and lobby for a law on the opposition, so that he could see who disagrees with his reforms and why. Yet he chose to promote the law on power, and all political activity drifted towards tightly guarded offices of the Cabinet of Ministers and Presidential Administration. Influence and power were no longer fought for in a public ideological competition, but distributed quietly amongst those who belonged. Was that what my President wanted?


On leaders, or, do not watch the pot

It is common knowledge that an event one eagerly looks forward to will occur when one stops thinking about it: a watched pot never boils.

“Ukraine is not Russia”, P. 474

FDR held office for 12 years, Leonid Kuchma has been President for almost 10 years. The timeframes are comparable, particularly in view of the accelerated socio-economic dynamics of the late 20th - early 21stcenturies.

The Ukrainian leader’s book summarizes the nation’s accomplishments during his presidency: enhancement of Ukraine’s independence; decisive dismantling of the old structures; establishment of a new state system; adoption of the Constitution; clear vision of the future; we have learnt to swim in the ocean of market economy; economists worry about the overly strong hryvna. That is it. 

Let us consider each item in a greater detail. 

The incumbent President has nothing to do with the declaration of independence: as an MP of the Supreme Soviet of the Ukrainian SSR, he did not vote for it. In his capacity as President he did everything to prevent the potential independence from becoming a reality. In form, my country is independent, as are one third of the world’s nations collectively dubbed “the third world”.  

Decisive dismantling of the old structures. The head of state is right: under his rule, anything that could be taken to pieces was, except for what required dismantling.  The best profitable enterprises have been privatized, while the loss-makers are still state-owned and overburden the budget; potential monopolies inherited from the Soviet economy (primarily, in the basic sectors of fuel and energy, metallurgy, petrochemical industry) have not been broken up, instead they have built up strength, become totally non-transparent, impenetrable and invincible; public planning has been annihilated, opening the door to budget abuses.  The social security system was dismantled without any adequate replacement.  

A new state system has been established. My president is right again: we do have a new system in place, which operates in the interests of 1%-2% of Ukraine’s wealthiest residents rather than of its “humble citizens”. The recently published data of the Accounting Chamber show how effective this new system is in protecting the public purse (budget). In 2003, the Chamber revealed cases of misappropriation and ineffective use of budgetary funds amounting to UAH 7.2 billion, which is nine times as much as in 1997. So what? So nothing. The Accounting Chamber exposes such abuses every year, with no consequences…

Constitution. A lot of my compatriots sincerely believed in 1996 that adoption of the new Constitution would be conducive to the rule of law, commitment to democracy, respect of human rights and freedoms, in a word, to normal life.  It turned out to be wishful thinking. We studied at school that the United Kingdom, cradle of European democracy, has never had a written constitution, but on the other hand, the best-drafted constitution in the world may not work without proper enforcement tools.   My President insists that my life without yet another constitutional reform will be a complete disaster, impossible in principle as life on Mars. Nevertheless, most monarchies in Western Europe are more democratic than all the parliamentary, presidential parliamentary-presidential and vice versa republics taken together. The new state system set up under Kuchma is beyond the rule of constitution. No matter what one calls this system, it has always been and still is a plutocracy.

We have a clear vision of our future.  What does it look like? I quote: “One can say, for instance, that we are heading towards a wider Europe together with Bulgaria and Romania. Ukraine’s ultimate, albeit distant, goal is also accession to the European Union whose members guarantee to one another the freedom of movement “of ideas, people and capital”, while Russia, as far as I know, has not announced its intention to do so. And yet, upon weighing all the pros and cons, I can claim that we are heading towards Europe together with Russia, rather than with Bulgaria or Romania, because we are much more closely related and interdependent.” Excusez moi for this long citation, but even on reading it several times I still fail to understand who goes where with whom and why. The only thing that stands out clearly from this passage is that we will not be in Europe in the near future.

We have learned to swim in the ocean of the free market. Some have learned, many others have drowned or drifted to faraway coasts. Amongst those left are either the daring, whom my President admires, or the destitute whom he disregards.  The former have learnt to swim and fish in troubled waters, the latter have learnt to breathe under water with recently-grown gills called self-employment.

Economists worry. Their job is to worry. Those who have no jobs in high offices worry for different reasons: they have always insisted that Ukraine needs tax reform, warned that corporate income tax and VAT should be withdrawn from the cost of goods as the most inflation-driving ones, urged taxation on profits and rents … The so-called “hrynvna strengthening” has been achieved at the expense of huge indebtedness, pension and salary arrears, domestic market shrinkage, etc.  Money is made on financial speculations, rather than in the real sector. The government’s major economic task is to stimulate effective public expenditures. This is exactly what Roosevelt did in 1933, when under the National Industry Recovery Act, he channeled USD $3.3 billion into public works. The logical sequence was: new job creation – purchasing capacity growth – business revival – increased budget revenues.  What we have here is: total taxes – budget – “inappropriate use of budget funds”. 

In fact, the outcomes of Leonid Kuchma’s presidency are lamentable. 

My President has not led the country out of crisis. Oh, I forgot, he favours crises for their ability to infuse new blood into nations, to nurture their resilience and flexibility. “The Chinese are said to make no distinction between the notions of “crisis” and “chance”, to denote them with the same hieroglyph,” - Kuchma writes in his book. J. Kennedy Junior also spoke about it in his time. I agree with both presidents that some people’s chance may prove other people’s loss. The state should take care of the latter. My President seems to admit it: “Wise authorities work to mitigate the crisis aftermath. Unfortunately, in times of crisis the authorities usually lack the necessary resources”. With this I cannot agree.

My President maintains in his book that Roosevelt and America managed to overcome the crisis thanks to military contracts for Europe in the run up to the Second World War. It is partially true, but there is more to it.

My President inherited from his predecessor a country in crisis but not at war, a country with gigantic productive resources, estimated at USD $600 billion or more. Where are they now?

About 90% of all privatized enterprises have been privatized during Kuchma’s presidency and have brought to the treasury, according to Vice Prime Minister M.Azarov, USD $1 billion. Shall we calculate the difference?  I wish I knew the cost of the military contracts fulfilled under Roosevelt.

Speaking about the military industry, for several successive years Ukraine has been among the world’s six largest arms exporters. As reported by the Stockholm Institute for Peace Studies, in 2002, which was the least successful year for Ukraine, its arms export was worth USD $270 million, one fifth of which went to the state budget (versus one fifteenth in 1999). Put differently, resources are available, but they have not been properly used to turn the crisis into a chance for the country and its citizens. 

Radical economic transformations were substituted with the establishment if a misshapen economic system generating monopolies, corruption, a shadow economy, poverty and stagnation, all viewed by Leonid Kuchma as stability. 

Roosevelt had to work within an extremely stringent legal framework and to substantiate every measure he undertook. Kuchma came to power when new legislation had yet to be drafted, with a scope of authority Roosevelt would have never dreamed of.  

Roosevelt aspired to destroy “the temple of privileges” and so he did. Kuchma set up the State Administrative Department and introduced privileges for the daring.  

Roosevelt is remembered as the President elected by the people three times in a row due to the success of his New Deal. Kuchma hopes to run for a third term with the blessing of the obedient Constitutional Court. Oh yes, he said he would not run any more. So much the better. 

Was Roosevelt an ideal president? Not at all. His term in office was associated with collusion with the mafia and big business, graft and corruption in trade unions, the unauthorized tapping of the headquarters of political opponents and allies alike… FDR was neither a saint nor a benefactor. He was a politician and a president.

Distancing himself from the crisis of the late 1920s, Roosevelt said: “It is not my child”. Kuchma will not be a father to the crisis, either. He blames it on the Soviet past and on the country’s leaders of the early 1990s. However, Kuchma adopted and reared the 1994 crisis once he assumed presidential powers. Having failed in his first term, he ran for a second.

It is under this president that industrial enterprises were privatized in breach of all fathomable rules and standards, salary and pension arrears became common practice, along with the confiscation/dilution of citizens’ incomes (through salary arrears, VAT, excise, monopolist price rises, reduction of social benefits).

It is under this president that all the uniformed agencies have mushroomed and become unaccountable, judiciary reform was foiled and the court system has been subjugated by the executive power.  

It is under this president that free thinking and expression, honesty and integrity have become a superfluous and dangerous habit, while hypocrisy and cynicism have been welcomed as a praisworthy merit.  

It is under this president that every societal innovation of the perestroika period and the early years of Ukrainian independence – glasnost, openness, people’s confidence and self-esteem, positive values the absence of which so saddens the head of state – was eradicated.

It is under this president that the people have lost respect for labour, law and human dignity.

This president had a chance to grow into a great reformer of a great nation. He did not use it, and he never will, third term or no third term.  We have been watching this pot for ten years now. It will not boil. It is the wrong pot…


A failed trust

Ukraine has been given to Kuchma in administration as a special trust. If this trust fails, it will be his voters’ fault, there will be no one else to blame.

From newspapers, November 1994

That is true. We should blame ourselves, recollecting, for the thousandth time, that the nation has the government it deserves. We will not speak about the nation. Instead, let us speak about me.

I allowed the authorities to do this to my country, because I allowed them to deprive me of civil and human dignity.

I am ready to fight with other citizens for the right to be called indigenous or state-forming, and to tell them what language to speak and what church to go to. 

I give and take bribes, complaining about awful corruption and crime. I break rules and trample the law.

I torture and kill my countrymen and countrywomen in numerous remand prisons, I deny them fair trial, I perjure and betray.

I hunt out enemies and masons.

I go hat in hand for the boss’s favours and alms – for awards, benefits, subsidies, compensations, posts…

It is not aliens who do this in my country. It is not Soros, Putin or both Bushes. It is me. The politicians that I brought up together with the President, oligarchs and top brass are not immortal and unbeatable supermen. They are cowards, just like me. They get insolent because I am silent.

It is my fault. Had I not been silent, my country would never have gone through all this disgrace.

I have started writing letters to “dear Leonid Danylovych” pleading with him to stay in office. I can write thousands of them so that he will give in to the people’s will and run for the third time. And I will elect him again. I will believe in video-cameras installed in each voting booth; I will sell my vote for UAH 20; I will fall prey to intimidation.

I will because I have children to take care of. 

Or won’t I because I have children to care of, to protect and raise as conscious citizens? Only then will I be able to straighten up proudly.

Closing remarks

I may be wrongly painting the situation in dark colours. Don’t we have true achievements? We do. I know of at least three of them. The first is the quantity of expensive cars. The second is the rise of luxurious cottages, mansions and villas. Vice Prime Minister D.Tabachnyk reported recently that 314 thousand residential houses were built in 2003 in Kyiv oblast, which means, he assumed, that about a million citizens joined the middle class.

The third accomplishment is the passage by Parliament of a law prohibiting hunting bears. One MP gladly informed his colleagues that the bear population in Ukraine had grown by 30 to reach 307 animals. This, he said, testifies to high growth rates of Ukrainian economy

If I failed to impress you with these success stories, I will quote another passage from the President’s book: “Let us all remember what a happy and lucky nation we are! Let us all remember God loves us, so everything will be OK”.

Other materials:
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Liudmyla Shanghina

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