Political Leaders Engage in Mindless Destruction

Kyiv Post :: November 19, 2008 :: link to the article on the Kyiv Post website
by Adrian Karatnycky

Legislators have a responsibility to their citizens, especially at a time of global and national economic crisis

When Ukraine’s parliament voted on an anti-crisis package Oct. 31, it sent a reassuring signal that Ukraine’s chaotic political scene was returning to a pattern of cooperation and consolidation. But in the days that followed, there were recriminations from the Volodymyr Lytvyn Bloc on how the vote was taken. Those came with denunciations of the rescue package by the Party of Regions, whose business stakeholders will benefit from the currency stabilization and economic discipline that the International Monetary Fund line of credit will impose. These outbursts made clear that Ukraine’s politics were returning to business as usual: disharmony.

As if that was not enough, any remaining glimmer of hope for a new consensus disintegrated with the Rada vote on Nov. 12 to remove Arseniy Yatsenyuk from the post of speaker. As someone who was new to legislative politics, some criticized Yatsenyuk’s command of parliamentary procedures and his handling of the difficult task of balancing diverse party interests. But Yatsenyuk is unquestionably one of the few macro-economically literate members of the legislature. Moreover, he is the most economically capable legislator from the once-staunchly pro-presidential Our Ukraine bloc. One would have thought that as a globally-wired former minister of the economy and the former acting head of the central bank, he would be seen as essential in heading the legislature at a time of global economic crisis.

That Yatsenyuk was done in by the internecine maneuverings of several former allies in the Our Ukraine bloc after reportedly earning the disfavor of Yushchenko, is all the more regrettable. Ukraine does not have an endless supply of economically literate politicians to take a turn leading the legislature. And Yatsenyuk was understood to be one of the country’s best economists.

It is fair enough to point out that a parliament has its own legitimacy and its members are free to vote as they wish. But legislators also have a responsibility to their citizens, especially at a time of global and national economic crisis. Perhaps Yatsenyuk’s dismissal will be followed by the rapid election of a new speaker who can work effectively. But it is highly unlikely to be followed by someone more economically astute.

Through my work, I frequently interact with analysts from major international investment banks and financial institutions. In the past, Ukraine’s endless shifts of governments, its frequent elections, its appalling parliamentary violence and its byzantine betrayals were shrugged off as immaterial. After all, Ukraine’s economy was growing smartly. And when crucial votes (such as IMF legislation) came along, powerful business interests in the Rada could be counted on to deliver the requisite minimum support for the country to muddle through. Today, Ukraine’s internecine political chaos is raising serious questions in investment circles about whether Ukraine will be able to respond quickly to the mounting effects and future challenges of the crisis.

This moment is categorically different from any since Ukraine’s independence. Estimates suggest that Ukraine’s economy will decline from around seven percent growth in the first three quarters of 2008 to 2.5 percent next year. And if the recession in the advanced industrial countries is more substantial than now estimated, that number could decline even further. This means there is little margin for error or dalliance and that legislators, the government, and the president must be ready to act in consolidated fashion. Yet Ukraine’s political leaders continue to behave as if there is no global financial crisis and as if Russia had not moved with a massive militarily incursion into the territory of a sovereign country for the first time since the Prague Spring.

At a time when the global economic crisis has led to growing national solidarity throughout the world, there is in all Europe no more deeply divided and unconsolidated political leadership than that of Ukraine. And even if there are new elections late in the winter or early in the spring, there are few signs that any broad-based political consolidation is on the horizon.

The level of mutual mistrust already among political leaders is having an important effect. Two cases in point: while the economic crisis has buried any hope for lucrative major privatizations, the last year was a wasted one for major privatization, largely because the President, his supporters, and the opposition did not trust that Yulia Tymosehnko would use privatization proceeds wisely and have kept in office a radical Socialist at the head of the state privatization agency.

Similarly, Ukraine today sits on over seven billion euros worth of carbon credits created under the terms of the Kyoto Protocol. These credits could be sold to Kyoto compliant countries such as Japan or Germany, who want them to offset their excess carbon pollution. Yet, as of this date, not a cent of this asset has been converted into hard currency for Ukraine’s troubled economy.

There is no secret for lack of progress on this front. It is not only due to the lack of trust between the president and the prime minister, but also because the two leaders are unable to compromise on what to do with this unrealized asset.

What is surprising in all this is the relative passivity of business interests. While business leaders often express private contempt for the ongoing political deadlock, they are invisible in the public debate. Where in all of this are the vaunted oligarchs, and the millionaires and billionaires who numerically are said to dominate the parliament? Why are they not on the front lines of the effort to press for a nationwide consensus on how to diminish the effects of the coming economic decline? Why are they not pressing Ukraine’s elite to establish a modus vivendi that could create a government with broad-based cross-regional support that would enable it to weather the coming storm.

Ukraine’s public, too, is becoming increasingly discontented with its political leaders. Over time, this will create an opportunity for the emergence of a new generation of leaders and new political projects. But in the context of economic decline, public discontent could be exploited by anti-liberal political extremists.

There is still a way out of the impasse. It will require decisive action, political courage, and the willingness of Ukraine's key leaders to put personal advantage on the back burner and to agree to compromise.

But this will demand statesmanship, which appears in short supply in today’s Ukraine. Instead, Ukraine’s political leaders shine in their venality and duplicity, and in their command of the politics of mutually assured destruction.

 

Adrian Karatnycky is senior scholar with the Atlantic Council of the United States and managing director of the Myrmidon Group LLC, a business advisory group.