Polish lesson of the successful transformation for Ukraine

It is my pleasure to be here in Ukraine. This morning when I was jogging here from Maidan and back, I met two groups of the people. First group was going in procession and were praying to God to have Matushka Ukraina. And then I met a small demonstration in favor of beznalogovoye gosudarstvo (tax-free state). That is is a strategy for Ukraine you are lost. There is nothing in this Nalogovoye Gosudarstvo. And we do need a strategy and policy for a long and short changes and not just believing that either God or tax-free economy will save us.
What is the lesson and the message from the Polish successful transformation to the degree. Before you got to Poland you will help to people. That this is success became made them nervous because they are complaining a lot, too. Definitely the reason of success in Poland at this not despite of sort of shock therapy but instead of. There wasn’t any shock therapy in Poland, it was the shock failure. Any success if a result of regular institutional building for the purpose of encouragement of private property based on entrepreneurship with proper state government proposes regulation and policy. Say, for your point is looking for recipe for success and if you failed, it will influence several generation. I’m talking about 20-30 years, not about 2-3 years. It is a quest for a proper synergy of the power of invisible hand of market, free private enterprise, and the power of visible hand of non-corrupted, committed and descent government, working in accordance with and talking to the people of a common sense. Then, any generation or so you may succeed and becoming a developed country, as they succeed in Poland at certain extent.
Say, things at this stage the critical challenge for Ukraine as a proper institutional building. Get the seconded rules of the game which will be blanched and which will be followed by entrepreneurship, mostly private. And of course for certain specific institutions different from the liberal economy with a support of government. Ukraine needs a sort of a state development bank. Ukraine needs a kind of post-soviet industrial policy. But it must be basically based on grass roots private entrepreneurship which will be a source of savings, capital from wealth and the source for investment. In the case of Ukraine, I would not put it on much trust on foreign capital. It may help. But it will only be an additional injection towards your own savings. And my advice if I was asked for one: be very careful with the foreign capital. Because the foreign capital is not coming to come. Foreign capital is coming to invest. And the reason of investments is profits, not for wellbeing in Ukraine or in Poland, whatever people. The best example one may learn I would say is not Poland but rather China, which is obviously best for foreign investments towards their advantage. Foreign capital has invested in China a lot. But the investment runs to the industries, to the branches, to the regions where it was required by the China’s economic policy not by foreign investments, but for favor of behalf of China.
But could it be called with the institutional due. There is only bad future for Ukraine if Ukraine will continue with its corrupted oligarchic capitalists. It the state capitalism which you have created for the last 5 years, because this is the corrupted state capitalism. There will also be bad future for Ukraine if you receive neoliberal model which is advised by some not so good economists and politic advisors, which failed in Poland during so called shock therapy in the early 90s and during the overcame of the economy in the late 90s. There is no room for in that kind of that prosocialist economy or for the state capitalism. I would propose to look at Ireland instead of this. It is something to what I refer as new pragmatism, which is a sort of post-socialist social market economy: definitely market economy with liberal regulation which has strong position of friendly for private entrepreneurship government, which also team to tax, the profits and invest the profits in infrastructure, social capital, inner capital. If you want to succeed, it is what we advised by ourselves in Poland. We have new government, a new prime-minister yesterday. She has had exposed at Polish Verkhovna Rada, Seim. That is balanced economy in three means. First is economic, that is between input and output, export and import, savings and investments, that is revenue, that is expenditure. In economic sense balance. But it must be also a balance to the any possible extent into other ways. On the one hand it must be social agreement. You have to take care of social inclusion. A good starting point for Ukraine is that you don’t have that much of inequality that many other in the post-communist economies have, including most of post-soviet republics. So social profusion is also a challenge and a chance and an opportunity, and the business people must understand that social profusion and social balance and social capital is a good investment in their private business. Because therefore society is integrated and is working instead of fighting, striking and making occupation of Maidan or whatever palace. And then there is ecological balance which is very important in development and I think that Ukraine is having a reasonable problems with over polluted environment and has also a chance to establish and development a little bit more of green economy-much more than we have that kind of economic treatment in the Western Europe.

01.12.2014
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