ElitExpert agency met with Andrii Novak - a famous economist, political scientist, public activist, author of the book "How to raise the Ukrainian economy" and head of the Committee of Economists of Ukraine to talk about the past, present and future of our country.
Recently, one of the channels talked about the fact that Ukraine lost 2021 thousand people in 400 - this is both excessive mortality and migration processes... Do you agree with such figures?
The standard difference between birth and death is 200-250 thousand people per year. Some year a little more, some - less. Now it continues to fluctuate from year to year, so I think that 400 thousand is an exaggeration. During the last coronavirus period, when most countries introduced strict restrictions on crossing the border and staying in the country, this helped us, and now there is a small labor flow of migrants.
How did the situation with the pandemic and the war in the east affect the country's economy? Is it a failure or have we rallied, on the contrary?
The country is mobilizing, especially in those areas where for many years nothing was done, or it was done "to the detriment". First of all, we are talking about the defense sector - both external and internal. Now, firstly, there is much more funding, and secondly, we have been receiving quite serious external support in the defense sector for the eighth year. The largest is the American one, but there are also Canadian, Australian, and European ones. That is, it is financial help, and various weapons, and training. Now the number of inspectors training according to NATO standards has increased. All this significantly increased the country's defense capability. The Ukrainian army is no longer what it was in 2014. That is why I am sure that Russia will not attack us. She understands that she will receive a very serious blow in return, which can collapse the entire Russian Federation with a reverse vibration.
Also, this year we are returning to pre-war GDP volumes - to the figures of 2013, even a little more.
In addition, it is worth noting that during these years Ukraine lost about 30 billion dollars of its GDP due to Russian aggression, but Russia itself lost more than 200 billion dollars! If before the war against Ukraine, the Russian economy was the 8th in the world, now it is the 14th - between Spain and Mexico. These are direct economic consequences for Russia, their war against Ukraine. But now we have recovered the GDP of 2013, and they have not, and will not do so for a very long time. For the Russian Federation, the economic losses are heavier than for us. Because, first of all, fighting is very expensive, keeping captured territories (Crimea, LPR, DPR) is also expensive. Plus, international sanctions have been imposed on Russia - energy and defense, that is, around which their economy revolves. Therefore, our economic disposition is the exact opposite.
Ukraine is now often accused of not being independent. How would you rate the foreign policy of our government? Is non-independence our tactic?
As Churchill said: "There are no permanent friends, there are permanent interests - personal or national." Does Western Europe feel bad now that they had external rule after the Second World War by the Americans under the famous "Marshall Plan"? Are they not living well now? The highest standard of living is precisely in Western Europe, even higher than in America itself. This is a direct result of external, specifically American, management, the most effective economic and political system. That is, Western Europe, physically destroyed after the Second World War, is today the most developed part of the world with a high standard of living. Another example is South Korea or Japan. I think that no one in Ukraine has given up on external management with such results.
We often hear that Ukrainians live in debt. Like, we constantly take loans from the IMF. Do you think we can somehow do without it?
The topic of cooperation with the IMF is one of the most speculative topics in our politics. You can open the media archives and, using the example of our politicians, who at different times were in different statuses — in the opposition or in power, see their attitude towards the IMF. You will see that in the opposition, the same politician beats his chest and shouts "the IMF is a yoke." And when he comes to power after the elections, the first thing he does is run to the IMF. When there is nothing to offer society, speculative topics are raised - which are the easiest to discuss.
Now for the fact. The IMF is the International Monetary Fund, which was established by rich countries to form a monetary fund and support weaker countries at the lowest interest rates. It is more difficult for weak countries to attract a resource, and if they attract it, they leave it under a large percentage, which makes them even more crisis-prone. This is Kabbalah. Instead, the IMF was created to give weak countries money at low interest, to support them and give them a chance to get out of the economic crisis. The largest donor to the IMF is the United States, followed by Great Britain, Germany, Canada, France, and Japan. IMF money is always the cheapest money for a country in crisis, which Ukraine is now, that is, at lower interest rates.
For comparison: when Ukraine now issues its domestic bonds or foreign loans, we are forced to promise and pay, because it is a public debt, it is an obligation. We pay interest 2-4 times higher than the IMF interest. That is, we will pay 10-12% of bonds, when the IMF gives us 1,5-3%? So where is it more profitable to take money? Of course, at the IMF. But the IMF imposes conditions when it sees that the country does not fulfill the usual credit conditions, which include the term of the agreement, interest and payment schedule. If the country does not cope, then the IMF says: in order for you to be solvent, you need to have a small deficit in your budget. It is our condition that we give you the cheapest money. The only condition of the IMF is a safe budget deficit. There are no other conditions. Everything else, only when the country itself does nothing. Then the IMF gives a hint: in order to have a safe level of deficit, pay attention to the revenue part of the budget. For example, here you are underpaid due to corruption or smuggling at customs. Do something about it. And they also look at the spending part of the budget. For example, you have a bloated bureaucratic apparatus - this does not exist even in America, although the American economy is 150 times larger.
In fact, this is something that the country itself should do on its own initiative. But if the country does nothing or fakes reforms, only then does the IMF impose conditions. If you want to get cheap money, then make the deficit safe, no more than 3,5% of GDP. What is wrong here? Here are all the questions for the so-called "cabal" of the IMF.
Do you think we are more dependent on the economy, oligarchs or our politics?
First of all, all areas of our life are completely dependent on the economy. When the economy does not work well, then the army, education, medicine, culture, sports are poorly financed. Likewise and vice versa — everything depends directly on the economic state of the country. Why do Ukrainians go abroad so en masse? Only with one goal - to earn more for the same work.
Of course, if the oligarchy has an influence on the general economic processes in Ukraine, then this influence is always negative, because the oligarchy strives for a monopoly. And the monopoly works according to the principle - the maximum price for the minimum quality. What we now have and feel, for example, in the energy market. There is a monopoly around. Monopolists understand that the consumer has nowhere to go, so they set the maximum price and tariff, and the quality of gas or electricity is questionable. Any grandmother will tell you that the quality of gas from a cylinder has dropped: you turn it on, and it barely sizzles.
So now the president has become the only one who has actually started at least some kind of fight against the oligarchy in fact. The law against oligarchs has been adopted. Previously, previous presidents did not make such decisions. He also raised the monopoly rent in favor of the economic passport of the youth. It's good. After all, there was a redistribution of oligarchs' profits in favor of children. How it will be implemented is another question, but he launched this mechanism to fight the oligarchy. The previous presidents only produced and strengthened it.
We understand that it is important to start the process itself. But it may take several years for it to start working effectively...
First, the state vertical must work for this. And the agency that works according to the principle - the worse, the better, or, at least, sabotages the decision, has not disappeared.
Secondly, the state machine itself does not work. It is bureaucratized and this has been going on since Soviet times. And another plus 30 years of independent Ukraine. So one person cannot change everything at once in all areas, and in a short period of time.
The weakest point of today's government is the economy. All these projects are certainly positive, but they are all an expendable part of the budget. The weak point of the current government is that they do not know what to do with the revenue part, how to increase it, except for the inflationary effect.
What do you think the central government should do in order to increase the revenue part - both public and private?
To do this, it is necessary to start with the main thing - the country must decide on an economic strategy. Last year, we celebrated the 30th anniversary of Ukraine's Independence, but it is still unclear what economic model of development we have chosen. There is no answer, and this is where all our economic problems come from. With the richest country in terms of resources in Europe, Ukrainians have the lowest level of income among all European countries. We are in the last place in terms of income - wages and pensions. We have fallen below Moldova, where incomes are already 5-8% higher than ours. And Moldova is a country without resources, there are only gardens and vineyards. The question is where is this "ozone hole"? That is, the authorities must decide whether we are building an agrarian economy, or an industrial one, or a post-industrial one, or a raw material one, or a transit zone in the center of Europe... Until we decide on this, in the next 30 years we will continue to discuss whether our pensioner will survive and whether we will manage to postpone the next heating season. A case in point is Korea (North and South). The same people, same mentality. Moreover, when they separated as a result of the war, all the economic resources were in North Korea, and the South was the begging part. Now in North Korea, people work for a rice card, and South Korea's technology is used by the whole world. The difference is that in the North the communist model of the economy, in the South - market and correct.
Who should determine the economic model of development? They believe that we do not have specialists in Ukraine, they say, we need foreigners. Is it so?
This is another populist topic that we do not have specialists. During this time, how many foreigners have we had in the highest positions, there were even ministers (Poles, Lithuanians, Georgians). Now give me an example of a positive result from these foreigners for Ukraine - at least one. There is no such thing. Our state of 40 million with a high level of education has its own specialists! It must always be remembered that only a Ukrainian can make heaven in Ukraine. Others are simply not interested in it.
You are a well-known economist, the author of the book "How to raise the Ukrainian economy", in which you proposed a model for the formation of a competitive and highly efficient Ukrainian economy. This book has been reprinted five times, and the first edition of your work was published in 2005. You mentioned that it was closely studied by the political elite. Tell me, have any of them used at least some elements of your research?
Tips are taken, but more by private business. Here they directly "roll" what they need. This is another confirmation that the private sector is more efficient than the public sector. Because it is its own. And the official understands that he is not in office forever, so while there is an opportunity, he lines his pocket.
What do you think should be the economic model of Ukraine's development?
Definitely not raw material. Because now we have such a situation that we seem to have a raw material economy. Cheap raw materials, cheap agricultural products, metal, chemicals — for everyone to whom we export raw materials. Therefore, it is clearly not this model.
We can build a transit model because we have a good geographical position in the center of Europe and a good intersection of western and eastern routes. But I, for example, will not be satisfied if we become a transport hub. Because only specific "points" that will be hubs, such as Odesa and Lviv, will benefit from this model, and not the entire country. This can be developed, but not taken as a guideline.
The agrarian model is also not suitable. An agrarian country is always a poor country with a poor population. That's how Vietnam used to be, with rice fields and everything. Our agricultural sector simply must not be disturbed. Due to its natural resources and high agricultural culture, this sector will develop on its own. It should just not be touched.
The industrial model is what the USSR has been doing since its existence: plants, factories. In a word, gigantism. Allegedly, there is nothing wrong, but there is no result for the citizens. After all, this gigantism was built on human bones. In Soviet times, people had nothing but work. That is, this model is the past day.
The post-industrial model remains — it is a bet not for today, but for tomorrow. For "tomorrow", we need high technologies that come from scientific solutions. This is something that not only the state, but also any manufacturer cannot do without. Your product will not be interesting if it is not high-tech. Therefore, this is the only option of the economic model for Ukraine.
But how can a country make a post-industrial model of economic development?
All branches and sectors of our economy are weakly functional, except for IT and pharmaceuticals. First of all, we have to deal with increasing the functionality of the entire economy. It has 3 functions. The first is production. That is, to begin with, you need to produce some kind of product or service. The second function is selling at a profit. Well, the third is the distribution of money. This is how any economy works: produced, sold, distributed. Each of these functions is inefficient for us. There should be normal market relations - on the basis of profit, demand and supply, but with the regulatory function of the state. Only in this way will we be able to reach the post-industrial level of development.
Olena Ovchinnikova spoke
Photo: Serhii Lyashonok
