Review by Olena Podolian
Author & Title: Åslund, Anders, Ukraine. What Went Wrong and How to Fix It. Washington, DC: Peterson Institute for International Economics, 2015, xix + 273pp., £22.95/$25.95 p/b.
The book is written on the premise that urgent and fundamental reform is needed for the national security and very survival of Ukraine as an independent state. It stays true to this throughout and lives up to the promise in its title. Ukraine’s and Central and Eastern European political and economic developments are meticulously narrated and thoroughly explained. The focus is on the ongoing fight against corruption and decentralization in Ukraine, along with relations with the EU and Russian Federation, including the latter’s military aggression.
Current political events and the economic situation in Ukraine underline the timeliness and empirical value of the book. In particular, the dramatic resignation by the Minister for Economic Development and Trade Aivaras Abromavicius, on 3 February 2016, which provoked outrage at home and concern abroad among Ukraine’s Western partners due to the practice being exposed of appointing ministers’ deputies in an underhand way. Although that resignation happened almost a year after the book’s publication, Åslund documents the case of Mr Abromavicius’ predecessor, the Minister of the Economy Pavlo Sheremeta, who resigned for similar reasons on 20 August 2014 (p. 111).This reveals the analytical insight of the book.
While the book does not explicitly present its theoretical framework, it speaks to the literature on political science (democratisation, Europeanisation and state capture), public policy and political economy. The book is organised along broad themes, each of which corresponds to a part of the book’s title. In the first part, Ukraine’s current precarious situation is presented and a cause for radical and urgent reforms is made, arguing for the EU to be a model and international anchor for Ukraine’s modernisation (chapters 1-3). In the second part of the book, ‘what went wrong’ is analysed: nation-building and external relations between 1991-2010 (chapter 4) and the political and economic regime of President Viktor Yanukovych (chapter 5). The third part is the largest, running to six chapters in order to advise on ‘how to fix it’. It begins with an overview of largescale
anti-regime popular protests known as Euromaidan and the demise of the Yanukovych
regime (chapter 6), followed by the review of reforms in the main policy areas: political reform, reform of the state, financial, energy and social policy (chapters 7 to 11). Each chapter concludes with a summary of policy recommendations. The overall conclusions are briefly presented in chapter 12.
Starting with the chapter 2, Åslund addresses an important issue of reforming a post-communist state, beset by oligarchy and populism. This has been less studied in the literature in comparison to research on regime change/democratisation, Europeanisation and economic transformation. In particular, such aspects of state-building as state collapse and state capture are explored; the financial meltdown being mentioned as one of the reasons for state collapse (p. 35). The analysis of state capture includes such important areas as large-scale embezzlement in public procurement of large-scale infrastructure and energy projects, infamous examples being the stadium construction in Lviv for the Euro 2012 championship and the purchase of oilrigs by Naftogazin 2011-2012 (pp. 91-93).
In more than one place, Åslund analyses the historical background and political roots behind the slow pace of reforms in Ukraine. Upon gaining independence, the three largest political forces dominating the parliament were the national democratic movement, hard-left (mostly the communist party successor) parties and centre (former Soviet establishment) which was more pragmatically than ideologically driven. Due to the stalemate between the national democrats and former communists, the centre dominated decision-making throughout the 1990s, hence little legislation was promulgated (pp. 60-61). In fact, Ukraine has never fully broken away from the
Soviet system, as a subsequent chapter-by-chapter analysis of policy areas convincingly reveals.
Finally, Åslund helpfully compares events and consequences of the Euromaidan protests with those of the previous protests known as the Orange Revolution, summarising the lessons of both in chapter 6 (p. 112). Although an economist, Åslund constantly considers politics to come first and opens chapter 7 with an argument that, as elsewhere in Central and Eastern Europe, after regime change in February 2014, a parliamentary majority was needed in order to carry out successful reforms; that was only possible after early parliamentary elections (pp. 113-115). Regarding economic transformation, Åslund demonstrates that none of the countries that postponed reforms did better than the ones that went for shock therapy and a complete overhaul of economy (p. 30). Likewise,
he states that only those post-Soviet countries that opted for early parliamentary elections are consolidated democracies today: Estonia, Latvia and Lithuania (p. 116). Along with supporting early parliamentary elections, Åslund argues for a move to a proportional electoral system as the only way to consolidate a party system in a corrupt state where single-mandate constituencies get ‘bought’ by businessmen (p. 125), and for adoption of a parliamentary system in order to overcome shortcomings of the double executive under a presidential-parliamentary system. All these arguments are in line with mainstream political science literature on democratisation such as Linz and Stepan (2011).
Opening with the words ‘Nothing is more difficult to reform than the state’ (p. 133), chapter 8 provides recommendations on state reform towards a small and efficient state with the independent and professional civil service. In particular, closing or merging half of the state agencies is recommended in line with the principle of delegating appropriate administrative tasks to local or regional authorities. Similar to other Soviet legacies analysed in the book, the current centralised system with inflated staff and superfluous inspection agencies facilitates nontransparency, inefficiency and corruption (pp. 134-137). The reform of the prosecution and judicial system is seen as paramount for both democratic and economic development. Success in this area of reform is linked to lustration of the broader body of judges and prosecutors and stronger support by European organisations, foremost the Council of Europe (p. 141). A new law on prosecution is positively evaluated for finally abolishing general oversight functions, another Soviet remnant, and increasing requirements for prosecutor qualifications (pp. 143-144).
Regarding anti-corruption policy, the adoption of a package of anti-corruption laws on October 14, 2014, is also positively evaluated. As another principal tool for increasing transparency, legislation on freedom of information along with accessibility of all legal acts, financial and public auditing documents are crucial (pp. 122-123).
In reforming Ukraine’s public administration, the least reformed in the former Soviet Union, the imperatives of depoliticisation, rejuvenation and professionalisation have also been complicated by corruption (p. 148). In particular, Åslund explains how the corrupt system of appointing officials, for instance the Minister of Defence – under whom Crimea was de facto lost to Russia – and general prosecutors since Euromaidan, is responsible for halting reforms since July 2014 and undermines reforms and credibility of the government (p. 111). While presenting and analysing Ukraine’s problems, Åslund states that no country has reformed on its own. When it comes to an external dimension, he outlines early on in chapter 3 why as a model the EU is preferable to Russia and Russia’s led Customs Union (pp. 39-40). The Association Agreement with the EU, signed and ratified by both the Ukrainian and European Parliaments on September 16, 2014, offers a blueprint and technical assistance for reform of the state and is expected to play a positive role (p. 150).
Whilst arguing for aligning reform with the Western guidelines, Åslund also provides a critical view of the International Monetary Fund’s ideology (p. 165) and the EU’s advocacy, as for instance of an agreement of October 30, 2014, ensuring gas supply to the EU over winter but imposing an unnecessary hurdle for Ukraine. Furthermore Åslund supports a ‘Marshall plan’ i.e. providing grants along with loans for Ukraine, explaining that perpetually taking on debt is financially unsustainable (p. 53).
The subsequent recommendations in such policy areas as agriculture, public finances
(expenditures, taxation, fiscal system, banking and budgeting), the energy sector and social policy (pensions, healthcare, school and higher education) can be summarised in three words: deregulation, decentralisation, and liberalisation. By this, the importance of systemic change rather than the improvement of incentives and selection of personnel is emphasised (p. 149).
Overall, the book represents a concise yet systemic and balanced account of political and
economic developments in Ukraine since its independence in 1991. It suggests that the economic troubles are principally a result of bad political governance. Even more importantly, the stark revelations about the state of affairs in Ukraine are supplemented by clear recommendations for reforms in the main policy areas, which is much rarer in the literature on post-communist countries than the historical and political analysis of problems. A number of issues permeate the book: a need for a break with the Soviet system, prompt and comprehensive reforms based on adoption of good practices from Central and Eastern European countries, aligned with and supported by Western organisations, foremost the EU.
Along with an obvious audience of students of Ukraine, the book would also be interesting to students of the Central and Eastern Europe, including Russia, of economics and public policy, and to policy practitioners.