Nikolay Amosov, January, 2001
I live in Ukraine. It also occupies my thoughts. So, I would tell them in brief, digressing from the high matter for the real life.
It happened so, that besides surgery, cybernetics and some writing, I got to be involved in politics. Though, initially I was not disposed towards it. I had not even been a Komsomol member. I was adherent of the "socialism with a human face" idea". But it turned out, that the Party needed an independent, competent professor.
In 1962 I was invited to the Regional Communist Party Committee and informed, that "people would like to nominate you for the Supreme Soviet of the USSR". I sincerely tried to give it up, but I was told: "Whatever you may say, the governing body has it already approved". It's clear, "the people" nominated me. Twice a year I attended Sessions of the Supreme Soviet, voted unanimously, and returning back home on Mondays I used to receive my voters, who sought my help as to improvement of their living conditions, pensions and other social problems (the procedure was rather painful). I had done this kind of work for four terms up to 1979. And then I had done the same already during Gorbachov's leadership - was elected a People s Deputy for 1989 1991 term. That time, I had done it on my own initiative, on the wave of enthusiasm, when at the age of 75 I gave up my director post at the institute and some of my energy got released. Naive man! -I would intend to make a revolution at the public health. Of course, nothing came of it. And here, the Soviet Union happened to fall to pieces.
So, first against my will, but then from curiosity I went deeply into politics, economics and sociology. I could attend secret libraries, read a lot, then made my own investigations and created models. The results of this passion of mine are given below. Perhaps they would arise interest in somebody.
Some words on the history of "perestroika" (rebuilding)
It's not true, that by the time Gorbachov came to power, the Soviet system had exhausted itself. Certainly, there were a lot of hardships, but stability reserve had still remained. People got accustomed to the socialist idea and would not think of changing the regime. Certainly, intellectuals wanted to get some freedom but without claims for changing of ideology Competent economists realized that the system was skidding, but explained it by excessive military expenses. All the more, the GDP growth continued, though slowed by 3-5%. The Party intended to rule forever. It is enough to read the resolution of CPSU Congress to understand it: " Acceleration through machine-building" with absolutely fantastic indicators for economic growth. Therefore, Gorbachov thought of "perestroika", as some small steps to improve the system. All the rest was done by self-organization. For example, the harmless Party resolutions in 1985-1988 had already made the dictatorship unsteady:"glasnost" (openness), alternative elections of party secretaries, cooperative societies, self-governing of enterprises with elected directors and ban for spirits and censorship indulgence.
Even those modest measures were enough for the people to lose fear and the system started to fall into pieces. The ban for spirits did not bring the expected productivity growth, but cost a quarter of million of all budget revenues, which were compensated through emission. Cooperative societies brought some more spare cash into the trade. As a result: goods deficit and panic; people threw themselves to make food supplies and stores got finally empty. Inflation began. Labor unions demanded new privileges and directors gave them, trying to win prestige. Self-governing of enterprises slackened supply discipline followed by hardships with execution of plans. Weakening of ban as to trips abroad and softening of custom rules, gave birth to small traders ("chelnoki") and profiteering and broke the foreign trade monopoly.
Against such a background in 1989 there taken place half-democratic elections to the parliament. There was heard at the Congress some shy democratic demands (Andrey D.Sacharov) and appeals to sovereignty among Baltic residents. The article of the Constitution on the leading role of CPSU was abolished. Gorbachov was elected the president. New Supreme Soviet adopted vague laws which seemed to be geared to market economy, but ("socialist market"), but the real planned economy was breaking down before one's eyes because of general deficit of commodities, budget and foreign trade: miners began striking; there was launched the movement for separation of union republics. Owing to those events, disorders accompanied by human victims took place in Tbilissi and Baku. Afterwards, the leaders of union republics had long tried to conclude the all-union agreement, but never signed it because of the communist GKCHP-putsch. By putting it down, Yeltsin, who declared the independence of Russia, took on special significance. Other union republics followed Russia. New Gorbachov's attempts to put the Union together through referendum were broken by meeting of the soviet republic leaders in Belovezh Pushcha: disintegration of the USSR had occurred. The CIS countries put out to open sea. Formally, communist parties were removed from the power, but actually the party nomenclature continued to rule.
Enthusiasm due to acquired independence and rebirth of nation didn't replace the lack of intellect by authorities: economic crisis had broken out. In Russia the Gaidar's government declared "shock therapy": uncontrolled prices and privatization. There appeared plenty of imported goods, but then immense inflation broke out, followed by depreciation of wages and savings. Industrial plants stopped working because of lack of coordination on mutual supplies and import competition. People grew poor. This crisis had spread out rapidly in all CIS countries.
Situation in Ukraine
It was written such a lot of stuff on our Ukrainian crisis, that I would restrict myself to just enumeration of key events.
Independence in 1992 was the euphoria of expectations. Disintegration of relations and sinking of labor discipline. Open borders: cheap import and exclusion of domestic goods. "Shock therapy": enormous inflation and loss of savings. Depreciation of real wages and pensions. "New Ukrainians": nomenclature privatization, easy money from export and price difference; "bank accounts at Swiss banks", villas and "Mercedes cars. Joint Stock companies, "red directors" of state-owned enterprises and ministry mess, chaos in industry management, failures with investors. However, there is no bankruptcy, factories have not been closed; though they don't operate. Workers are not discharged, but are not paid their wages and official unemployment is small.
"Social field": culture, science, schools and institutes are retained, but it's financing is 3-5 times cut down. Hospitals are being relieved with humanitarian aid.
Inflation has been stopped in 1995 through devaluation of domestic currency, however without positive result for the economy: by 1999, GDP hasdecreased by 60%; in 1998 it equaled only one thousand US dollars per person against 25-30 thousand US dollars in USA and Europe.
For the sake of justice, it should be noted that low indicators in UN and the World Bank's reference books are explained to a great degree by "shady economy", amounting to 40-50% of the total production volume and not included to statistical data - no taxes are paid from it. The state lives on credit: IMF; "pyramid" of treasure bills; non-payments for oil and gas to Russia and Turkmenistan and indebtedness before workers of budget field. Enterprises are strangled with taxes, which consist up to 80% of revenues, but only half of all taxes are collected. There survived only metal production and chemical industry, which give money for "critical import".
However, according to the World Bank's diagrams, power-consuming of 1 GDP unit is 10 times higher (!) than in USA and Europe and three times higher than in China. (Indicators are exaggerated because of the shady economy). Reformed collective farms have reduced their productivity by 60%. Fortunately, the losses were considerably compensated through private vegetable gardens. There is no hunger in the country but income of one half of the population is below living wage. Production of light industry has five times reduced, that of food industry - 3 times. There are enough goods - import. They are not much in demand: no money. According to statistics, monthly income per person amounts to 60 dollars, which is twice less than that of the Soviet period. However, the purchasing power was one third more: addition is caused by shady economy. Inequality is 1:15. Such groups of the population as alone pensioners, small office workers and families, having many children live in misery. Intellectuals are trying "to survive". Those who are young and clever choose to emigrate.
What does the people think? In 1997 I resumed again my newspaper polls of 1989-1991. Together with the Fund of Boris N.Malinovskiy, corresponding member of the National Academy of Sciences, we interrogated citizen of Ukraine on to 40 issues and received 10 000 answers. V.B.Bigdan and T.I.Malashok have processed them. I give here some data, assuming that they have not much changed during two years, because the situation in the country has not been improved.
5% of the population lives "very poor"; 39% - "poor"; 52% - "satisfactory". 3%. - "Good". 16% -wants to go abroad for a while; 5% - wants to go abroad forever.
"Full and partial trust": 23% trust to president and government; 8%- to Verkhovna Rada; 1% - to local authorities; 17% - to "Rukh" movement; 20% - to communists; 9% - to all parties of the center; 18% - to mass-media; 5% - to court of justice. But 33% of people trust to nobody!
National question: 76% - "for equality of all nations; 17% - for "Ukrainian priority"; (79% of questionnaires were received from Ukrainians).
"Where shall Ukraine aim at?" 44% - at Europe; 16% - Russia; 20% at both (Europe and Russia); 20% - have not still determined; 27% - for joining to NATO; 20% - at union with Russia; 24% - at neutrality; 29% - do not know. Separately, young people (up to 40 years): 56% - at Europe; 9%-at Russia; 36% - do not know.
"Political strategy": 29% -more socialism"; 30% - "more capitalism and the rest are not clarified themselves
38% of young people and 26% of older ones declare for capitalism; 15% of young people and 45% of pensioners declare for socialism and the rest are not clarified themselves.
37% are for presidential republic; 12% - for parliamentary republic; 32% - for the Soviets; 12% - for dictatorship.
"Reasons of power weakness": 67% -dishonesty and careerism of politicians; 47% - mafia's activities; (other reasons - minority).
"Public activity": 7% - readiness to strike; 14% - meetings and pickets; 17% - meetings; 45% - private talks; 16% -have not responded.
"Prospects for the Future": 8% -improvement in 2-3 years, 45% - in 5-10 years, 30% - it will be far more worse, 38% - social explosion is possible. 29% - Ukraine will reach European level, 30% - it is impossible to catch up with Europe.
Some of my friends are entrepreneurs. Here what they used to say about our "capitalism". Certainly, it is only a small share of our sad reality.
Western investors do not come: they are afraid of bureaucracy, officials' corruption,
robbers; changeable laws, bad infrastructure and high expenses for social field. Once income tax for foreign investors was reduced, but there have still remained a lot of other requisitions, such as VAT, allocations to social funds, amounting to 35% of salary schedule and quite a number of local taxes. Common taxes can be totaled to 70-80%. A ban was imposed on export of revenues and products. It is impossible to purchase a piece of land for a factory construction, only to lease. Domestic banks are very weak and western banks are not allowed: there are no credits available; It is rather complicated to sack a careless worker and socialist wage-leveling and parasitic attitude have trained people not to work fairly. Both, functionaries and workers have "proletarian" hatred against a proprietor; In general, such country situation is called "bad investing climate". In 2000 both the President and the Government promise to improve the situation, but as of the middle of the year, there are no changes for the better.
As to the shady economy, its main point is payments in cash, "double accounting", barter, credits, non-payments. For example, a factory is out of operation, but in accordance with documentation, it stands idle. It means, there are no grounds to pay taxes: a director can make a profit out of this situation: to feed up a worker without wage and to bribe an official. It seems so, that " shade" is good for everybody, as well as for the state? (How it would be possible without a "shade" to deprive the working masses their wages for a year or even more?)
It is important to mention degradation of morals. They were not very high even by the Soviets, because one did not believe in God, but still, people felt responsible before their fellow workers, before society, even before Motherland and the communist idea. Now the ideology has changed. They say: a personality is the core of all, but a collective and ideas are nonsense. It means: do whatever you like, take whatever you can: a cult of animal egoism. However, a lot of my countrymen have declared that they began to believe in God, though now these are only declarations and not changing of attitudes.
Low morals: the lack of conscience, duty, responsibility and even elementary diligence. And for many others it followed by bribes and pilferages. Further more: robbery and violence up to ordered premeditated murders. 2-3 times increase in crime is registered. But the point is not only this. The quality of manpower is rather low: socialist leveling and parasitic attitude trained people not to work intensive and honestly ("they pretend that they pay us and we pretend that we work").
Paralysis of power. Our economy turned out to be a hostage of democracy: the parliamentarians are not able to adopt strong laws owing to private interests, difference of ideology and fear not to be elected again at next elections or to be overthrown before the appointed time. The president is not able to use force: first, due to the Constitution, second, because of the fear not to be enough democratic in front of America and Europe, which guarantee independence against aggressive Russia. And what's more, the government doesn't possess such a power.
How to get off the crises?
One offers a lot of ways to reform the economy. I will mention those, which I find most realistic. Even just enumeration of them seems naive: when the ways are known, why they have not been implemented? Self-organization is again to blame: resistance forces and possible negative after-effects are made out behind each issue. In brackets I would point out possible obstacles for every point.
To retain the stability of domestic currency, Hryvnia (Victor Yushchenko has demonstrated, that it's possible
To promote receiving of control packet of shares by efficient private owners through auction currency privatization. Sale terms are to be under control. (This is supposed to be a long and complicated process, at least for five year period, taking into account the above-mentioned on "shady economy")
To nationalize non-efficient privatized enterprises. Doubts are the same as in issue "2". Long court procedures are to expect, because owners are supposed to resist).
To toughen the management of state-owned plants and those with control packet of shares, belonging to the state. New system of director appointment is needed: competition, contract and control. (Doubts are the same: "red directors" have become very influential; ministries are weak and slow, but the laws on labor don't allow delivering working bodies from ballast: trade unions would resist it. Terms and results are hard to determine).
Centralized planning of industrial policy is still needed, because state capital investments and industry restructuring are required for real market economy (Development of good planning programs depends on how competent the government is and it would take a few years. The experience of Gosplan (State Planning Committee) has been already lost and is useless for market economy).
To make the burden of taxation for industrial enterprises easier, increasing at the same time tax collection. This step is important but difficult to implement. (The radical decrease of taxes would lead today to budget deficit, and increase of production is to be expected only in some yearsÅ And these years are to be somehow lived through!) And again: one would not stop to avoid taxes even after their decrease. Such are "the soviet morals": to cheat the state has never considered a sin. It would be also impossible to organized strong control and to judge those guilty: there would be plenty of them, besides the laws are weak)
To extirpate "shady economy" is of great importance. (About hardships I have written already: it is impossible to influence at once all participants of "shady economy).
To introduce computer control of taxpayers' incoming and progressive tax on immovable property. To minimize tax privileges (This step would be resisted at all levels. For example, the majority of directors has got rich and would hinder this step).
To increase custom tariffs for the sake of supporting products of profitable enterprises (This step is to be very good calculated, because the supporting effect" would work immediately, market prices would increase, import would reduce and the state and consumers would suffer).
To introduce selected price control as to the "supported" products. It will be required to compensate for expenses of "manufacturer supporting (Unfortunately, it is always dangerous to intervene with price policy because of its psychological consequences: rush demand and deficit).
To make easier the bankruptcy procedure. (This step is very important, but would be difficult to implement because there are a lot of unprofitable enterprises; the law is not good enough; court procedures are slow; execution of sentences is hampered through the law on labor).
To carry out general reduction of the staff, dismissing useless workers in all fields of both, the budget and state enterprises. To legalize the concealed unemployment at operating enterprises. (It would be exceptionally difficult to do, because of mass resistance of workers and Verkhovna Rada. This step by step procedure can take some years).
To try to organize socially useful work for the unemployed (It is sad, but our unemployed would not agree to build road, even for a decent wage, as it was the case in the USA during president Rouzwelt' ruling. Even more so, that many of Ukrainian unemployed have already accustomed to live in poverty and to do nothing.
- To reduce budget expenses: for management, Tschernobyl, State subsidies for housing and ungrounded privileges. To close unprofitable mines (All this is an old and hopeless dream of administrators. Resistance is supposed to be organized from all sides: Tschernobyl-workers, bureaucracy, miners, tenants, and "privilege-holders"- former directors. Therefore, this step is hardly real to save state-budget money and is very critical for future candidates to the parliament.
- To secure well-timed payment for electricity and gas. To recover old debts (It would hardly be possible owing to bad financing of budget institutions and delays in payment of wages to workers).
- To strengthen the struggle against criminality. This slogan sounds like an exorcism (This step is as necessary, as it is hard to implement). The following is required: to make laws stronger, to develop economy; to decrease unemployment, to strengthen the executive power and to raise morals. So far all this seems unreal).
- To bring back the capital, taken abroad, both legal and illegal (through amnesty). This is a real opportunity, which can be efficient. (However, the capital holders would consent to such a step, provided they receive the guarantees of safety and interest. In other words, it can happen in case of economic upsurge and trust to authorities. It is hardly to be done at one stroke. One needs time to restore the trust.
- To attract interest of foreign investors (as I have mentioned already, it would be very hard to do).
- It would be difficult as well to make average citizens to take their dollars out of hiding-places and put them to a bank. (Reasons are the same: one needs stable economic growth and trust to authorities).
- As to the raise of agriculture, I have failed to find cogent arguments. (Large-scale farms are to be founded, but there are no necessary prerequisites for them: credits, equipment and the law on land.
- Industrial policy: priority rating for state-capital investments shall be: light- and food industries, machine-building (for agriculture, transport, light, -food and mining industries), motor-car construction , military complex, electronics, aviation, cosmos and biotechnology. It is clear, that scientific and research developments are to be carried out in all fields, but the choice of concrete objects for production shall depend on amount of expenses, market and preparedness of enterprises (There is no grounds to initially stake on science-intensive production: first, there are no conditions for it, second, a large industrial country first requires for its functioning "normal" machine-building but not engineering exotic).
- It is necessary to reduce at least one third of energy consuming, (To do it, one needs to radically change the production technology and consumer psychology. But this would need at least twenty years, provided large investments into facilities are available).
To implement all above-mentioned, as well as other components of declared reforms, unknown to me, one needs an interaction of four importantforces: power, people, public and capital.
Our power is known: everything as it should be: constitution, democracy, election. Power "filling" is different: idealists, nomenclature, oligarch, and even criminals. Political convictions: communists, nationalists, liberals and about ten other names. Accents of ideas: motherland, nation, capital and socialism.
Inconsistency. No uniting idea is available.
There is no principal thing to organize an efficient management: law predominance and mechanisms of its implementation. To tell the truth, there is no compulsion power, equal to mass violations of the law. I see now the only way out: drastic strengthening of all "vertical" state structures: administration, Public Prosecutor, courts and police. Unfortunately, one very important condition is not available to make the above-mentioned efficient: high morality of executors. Without it the power of law turns into tyranny of officials.
People. Differs on many parameters: young and pensioners. Poor, not very poor and rich. Urban and rural. Eastern and western. Ukrainians and Russians.
The same is with their political views and convictions: socialism or capitalism, with Russia or with Europe; "strong hand" or "all civil rights" (See results of our polls).
And what about the people himself? Works badly. Shows no initiative. Lives in poverty. Trusts to nobody. Grumbles, but not very laud: has lost confidence and is frightened. Votes according to lists but not for certain programs, and "due to technologies": for promises, tips, because of a fear and "for the portrait". What else? Watches TV serials. Overdrinks himself .
Public. It is also not available. In the sense it exists at the West: communities of citizens on occupations, interests, ideas, hobbies, religious beliefs and residence. Citizens, who are independent, free, protected by the law, but at the same time, law-abiding and disciplined, having medical insurance and even bank account. There is nothing like that! Once, communists exterminated even thoughts about public meetings, discussions and demonstrations...I do not know, when it will be back again. Generally speaking, the most active citizens have to join parties. There are quite a number of them, but they are all pygmies. The real one is only communist party, though it can not be compared with that of the soviet times... Programs of others are hardly distinguishable; parties are mostly founded on ambitions of their leaders. They are far away from the people.
There are a lot of various mass media: newspapers and TV channels which are not interesting, obedient to authorities, oligarchs and even (moderately) to criminals.
Capital. Before "perestroika" the capital stock of industry was larger, now, after its considerable decreasing, it is hard to estimate. The banking capital is obviously weak and is not able to finance the growth of production. I can not go inside the property distribution: no information available. I can only say one thing: as of today there is no capital as a self-sufficient force.
On the future.
This country is so unorganized, that it is hard to forecasts its future prospects. One can talk only on alternatives. There are some of them. I describe each in brief, so far as I understand it.
First: Suppose, the communists will win. It means return to soviet power and strict state governing of economy. Some years ago, Bulgaria had already gone through such restoration and country's economy collapsed. To make the former alternative work, one requires a "full set": not only Central Committee, and Gosplan, but also KGB (state security). The communists would be forced to do it, in spite of their attempts to look like democrats and market economy adherents.
Would it be so terrible, provided it happen to be realized? There would be certainly no bloody repressions. I had calculated it still in 1991 (it was published in a newspaper): were it have been possible to free the soviet system of excessive expenses for armament (25% financial means and 40% of machine-building industry), then Ukraine would have been able to provide about 150 dollar monthly income per person. It would hardly be higher: no hopes for the progress, which the system would not allow. This would have been an ideal situation. But at present, to do the same after the crisis one would have needed two five-years-plans. However, the real communist elite got bourgeois and the first alternative is impossible. Anyway, it can be converted into the next one, provided, the good leaders appear.
Second: Nomenclature capitalism. The union of power and capital. It means market economy with a great share of state and mixed property (60%) and government interference with controlling of taxes, tariffs, prices, discount rates, emission, foreign exchange rates, capital export and trade licensing. All this would be done to pay wages to functionaries and to provide financial means for industry, upon which there would parasitize both, nomenclature and, what's worse, criminals.
Governing: mostly decrees, but not real laws, because the parliament is hardly to rely upon and able to form a responsible government. And who would allow it?
System of state capitalism has gone through some interpretations. First, despotic ruling of a single party, like in China or Taiwan. Second, dictators, either generals or presidents with their pocket parliaments. Those were: general Pinocheut in Chili, Sukarto in Indonesia, dictators of South Korea and many other countries of South America. There were some good examples of economic growth, but most of all, such systems used to end in stagnation, revolution and restoring of democracy, followed by long period of economic reconstruction. Only China is a good example owing to its hard-working and disciplined people, since Confucian time trained to live in order but in utmost poverty.
Is it possible to establish state capitalism without dictatorship? It's difficult to say: no examples. A charismatic leader may do a lot due to his high prestige, when addressing directly his people (I mention here General Charles de-Gaulle). But where to take one more such leader?
Third alternative - mature society of Western Europe. (I have described it already). But the system of this kind functions only by powerful economy. We can not use this alternative.
So, it turned out to be, that there is no alternative. Not a single one available is good this country. Communists are hardly being able to win the power for establishing socialism with "Ukrainian specific character". However, they would be in strong opposition, hampering any reasonable solutions.
For a second alternative, Ukraine has no powerful legal force or any potential dictator. For the third alternative Ukraine is not mature enough.
But what will be an alternative for this country? There has to be some, hasn't it?
There will be self-organization. The slow movement towards maturing, starting from the point, where we are now: one needs to undo patiently theknots of contradictions. "New-old" president, as well as the government has declared good ideas. There are still some hopes. Let's wait and look.
My ("unenlightened") opinion: Due to maturing stage and taking into account the economic crisis, Ukraine requires a presidential republic with "controlled" democracy.
No tragic alternatives of development are foreseen. At least this is good.