The Ukrainian Dream, the Orange Revolution and the WTO
Don't Give up, Do the Homework, Do Your Best!
Why should it be my loneliness,
Why should it be my song,
Why should it be my dream
— Langston Hughes
Last month, WTO Director-General Pascal Lamy discounted Ukraine's chances of becoming a member of this organization at its Hong Kong ministerial scheduled for December. It came as little surprise to local observers, as Ukraine had been falling behind schedule in passing the required legislation and signing bilateral agreements with the US and Australia. President Yushchenko pursues the dream against all odds. He has urged the cabinet to step up the efforts and stressed the benefits of membership in a nationwide address. However optimistic he may be — and with the Kryvorizhstal coup to his credit, his optimism has received a fresh impetus — this year the WTO hails Saudi Arabia and nails Ukraine with backlog homework. On the eve of the first anniversary of the Orange Revolution, the WTO issue has electrified the media. Economically enlightened revolutionaries, some of whom brought the EU star-circled banner to Maidan, maintained a view of the WTO as a waystation en route to EU membership. Now that their Ukrainian Dream has been deferred on most counts, hard questions arise.
Total recall: How did we get here?
Accession talks began in 1993 and had proceeded at snail’s pace — a soap opera spanning two presidencies. The Orange Revolution changed that, introducing the need for speed. So what does it take to make a story so long? Let’s put the events in perspective.
Leonid I, one of the founding and festive fathers of Ukraine’s modern democracy, never counted himself among isolationists. As the elite-schooled head of Soviet Ukraine in the Gorbachev era, he had the intellectual capacity to grasp change and the political agility to assume a leadership role once momentum had built up during the foiled August 1991 coup in Moscow. By Christmas, Ukraine’s independence — Moscow’s hellish nightmare and the dream of generations of Ukrainians from Chicago to Chelyabinsk — finally came true. Hasta la vista, Big Brother!
And there he was: the renegade hero, the Terminator of totalitarianism. Being a new kid on the block internationally helped Kravchuk’s roadshows attract considerable publicity. The sizable Ukrainian diaspora in the US and Canada added even more glamour. Somehow, despite all the rosy estimates of Ukraine’s reunion with the West he would pick up en route, things were not going as smoothly at home. After the party was over, Kravchuk flew back home only to find his country’s socioeconomic climate rapidly deteriorating. The West helps those who help themselves. He learned that. But the problem was, Ukraine couldn’t help itself — and neither could he.
Much to his disappointment, the incoming Clinton administration would not change that formula. In a unipolar world, foreign policy no longer moved the hearts and minds of Americans with the magnitude it had used to. The perceived new world order devalued the role of foreign of policy and amplified preoccupation with domestic issues. Wishful, end-of-history thinking was the staple of the liberal discourse. In the calm and cocooned serenity of the early days of Clinton’s first term, it was the ailing US economy that cried out for more attention, sending those ripples of mild isolationism through Washington.
Inertia was the strongest factor in the Ukraine policy. Washington simply stayed the course, relying on a generic, hands-off, Moscow-centric policy it had inherited from the Bush administration. That “Chicken Kiev” policy had a side effect: It methodically promoted the “Russian Bear” as the sole role model in what was euphemistically termed "Eurasia." When it came to Ukraine, what really turned Washington on was the country’s accession to the NPT (Non-Proliferation Treaty). It’s not the economy, stupid! It’s the nukes!
In the 60s, Clinton’s pilgrimage to Moscow — the soul-searching shrine so many liberal roads had led to — and his Oxford schooling, which certainly included works by Tolstoy and Dostoevsky, translated into an intellectually nutritious diet. On both sides of the Atlantic, liberals’ — and not-so-liberals’ — love affair with Russia goes a way back. Stalin, the genius of genocide, had banked on Russian literature’s humanistic pearls to attract the likes of Bernard Shaw to the site of the Soviet experiment in the 20s and 30s. It was a cozy quid pro quo: The successes of the Soviets, often subject to self-serving exaggeration, resulted in a stream of praise for Stalin. By making a striptease show out of those “successes,” the authors, could spearhead their proxy cause in Britain. The German U-boat blockade of Britain during the WW I, the millions of pounds funneled into the war effort, and the Spanish flu pandemic of 1918-19 left Britain’s living standards down in the dumps. (As the major supplier and creditor, the US collected the war dividend and fared better than Europe in the 20s.) Socialism would command even more support in the days of the Great Depression. Besides contributing to the Keynesian welfare state and the New Deal, the fallout of the Great Depression brought home the pernicious effects of tariffs on world trade: As governments went on a “beggar–thy-neighbor” protectionist spree, they killed the very millions of jobs they had tried to protect.
How were the Soviets actually doing? The New Economic Policy of 1921-28 indeed revitalized the war-ravished, Bolshevik-terrorized Soviet economy — by partially reinstalling the mechanics of capitalism in the agrarian sector, which bolstered the retail sector. That semi-market interlude was the closest the Soviet Union would ever come to socialism, assuming one with a human face. Stalin would abandon the NEP for a policy of industrialization and collectivization. In the 30s, that dual policy squeezed the dominant agrarian sector in a rob-Peter-to-pay-Paul grip designed to sovietize and modernize the economy. The farmer, an institution with its roots in private property and surplus produce, did not belong in Stalin’s political economy. For that reason, Ukraine, the breadbasket of Europe and the number one target of collectivization, became the graveyard of at least 7 million Ukrainian farmers in 1932-33. They died a tortuous death after armed supply squads had roamed their villages, siphoning away whatever grain supplies they could get, depriving the farmers of the food they needed to survive. The Ukrainians call it the Holodomor: a “famine-for-food” program from a government in a state of war with its people, one of the most horrendous crimes against humanity perpetrated by communists.
Meanwhile, some members of the cognoscenti au pair program were not blind to the honey trap. But they would never come out of the Kremlin’s closet to have the bourgeois imperialists poke fun at their circumstances. “My enemy’s enemy is my friend.” This unspoken oath of loyalty made them the watchdogs of totalitarianism. Sacrificing integrity at the altar of solidarity, they guarded the dark side of the “proletarian paradise.” New York Times reporter Walter Duranty carried this public relations servitude to perfection — of Pulitzerian caliber — when he reported that no evidence of famine in Ukraine had come to his knowledge. In private conversations, though, he was known to admit that probably millions were dying.
By that time Stalin had thoroughly diversified his foreign policy portfolio. As millions of Ukrainian farmers were dying, the USSR would send trainloads of food supplies to the Third Reich, and would train the very Luftwaffe talent who would later raid Soviet cities. Gross? Boss-to-boss. Doing business with Hitler was fun: a tribute to the German government, which had blessed and bankrolled a trainload of Lenin & Associates bound for St Petersburg in 1917. Stalin’s hidden agenda: Let Hitler, the “Icebreaker of the Revolution,” overrun Western democracies and overextend his forces; once he does the dirty work, Pax Sovietica will spread her wings and take him out.
Having embraced this strategy, Stalin would deploy the Soviet troops in strike, not defense, position — only to be outsmarted by Hitler, who stroke first. Of course, Stalin had been briefed on the Barbarossa plan. De facto entering into WW II on the Axis’ side, he had counted on the Molotov-Ribbentrop Pact not only to partition Poland and bag the Baltics, but also to buy time and secure a good perch. Still, ego would win over intelligence. Enamoured with his pet plan, he had held onto it with a catatonic tenacity that had made him rely on faulty assumptions and disregard early warning reports — within hours of the war’s outbreak. The bottom line: It took Generalissimo Stalin 23 million, or even more, Soviet lives to make up for his military missteps. Ukraine alone matched, or even surpassed, Germany in total casualties: 8-10 million for Ukraine versus 7.5 million for Germany. The road to Berlin was paved with corpses rather than coups. And for thousands of those who had made it, the road home led to Gulag, not glory. In Stalin’s war accounting, life cost cheaper than lead, which made bookkeeping a worthless business. In his postwar accounting, life cost cheaper than logwood, which boded well for the Siberia logging business. That’s why shopping for exact figures on the Soviet side, in times of war and peace, poses problems.
Once Washington and Moscow established rapport, the tragedy of the Soviet people and the staggering sacrifices of the Red Army beautified Stalin’s image in the Western media. Uncle Joe posed as a dauntless, down-to-earth democrat defending his nation against Nazism. At the Yalta conference, FDR, in the last days of his life, made friendly advances to Stalin that irritated Churchill and bordered on appeasement, which only fueled Stalin’s appetite for adventure. The head winds of the Cold War and the McCarthy hysteria would sweep the tide of public opinion in the opposite direction. With no Hitler to hold them together, the honeymoon between Uncle Sam and Uncle Joe came to a grinding halt. In the atomic age, they no longer adored each other. Sealed behind the Iron Curtain, the Ukrainian Soviet Socialist Republic, one of the founding members of the UN, stood no chance of joining the GATT, a precursor to the WTO.
Certainly, the Soviet Union’s footprint in international trade cannot be denied. In the 20s and 30s, Lenin and Stalin had exported commodities, precious metals, and jewelry to the West in exchange for know-how and industrial equipment. In the 60s and 70s, Khrushchev and Brezhnev would import grain from the US and Canada, trade with Finland and within the COMECON. In the mid 80s, following a high turnover season in the Kremlin, Gorbachev would export gas to Western Europe. That said, the country remained a centralized, command-and-control, agoraphobic autarky. Until the very moment it was pronounced dead, the Soviet economy had kept the CIA perpetually perplexed over the size of its defense budget. (Den Xiao Ping knew better than to let this happen to his brand of communism. He had a different guns and butter equation in mind. Maybe that explains why, despite its human rights record, China’s economy now accounts for one third of the world’s growth and has reaped huge benefits from its WTO membership.)
The Cold War was also fought in the trenches of culture. As long as the Iron Curtain existed, defections and ideological cross-dressing would me a major line item on the scorecard of each contestant. A Colorado-born heartthrob named Dean Reed, aka “Red Elvis,” toured Latin America and the Eastern bloc from the 60s to the mid 80s. His rock and country performances, spiced up with songs in Spanish, touched the common folks by communicating a cultural alternative to American expansionism in a region deeply antagonized by it. “Comrade Rockstar,” as he was also known, he stroked the Soviet Union, which maintained a visible sponsorship presence in Latin America. In the Soviet Union, he became a perfect propaganda plaything: a commie cowboy. Unlike any other Western idol, he carried the “right” message — to a youth audience that was increasingly responsive to Western music. Some believe Dean’s geographic mobility and street credibility also made him a perfect clandestine operative for the CIA. Because he mixed and mingled with thousands of people on a daily basis, tracking his contacts was hard. Reed’s death in 1986 still has experts mixed. Was it an accident? An assassination by the CIA or the KGB? Or a suicide caused by the ultimate apathy about the Soviet Union?
Somehow, against this blistering background, Clinton’s political flirtations with “born-again” capitalist and democrat Yeltsin kicked off nicely. It was during one of those rendez-vous that the he and members of his foreign policy team like Strobe Talbott found themselves equipped with a window on Ukraine — where that country’s “enfant terrible” image was a permanent fixture. Look at that! What could be more dangerous than this gang of rabid Rukh nationalists, Gulag graduates, stiff with nukes? (Someone like Karen Hughes should have been there for us to make it more objective.)
Ukraine, the proud owner of the world's third largest nuclear arsenal, boasted 130 SS-19s (aka “Stiletto,” 6 warheads) and 46 SS-24s (aka “Scalpel,” 10 warheads). In the eyes of the Pentagon, this calculus raised the specter of nuclear holocaust, should the Balkan scenario arise. In the eyes of State, Ukraine appeared to be a major nut case of a country: multiple ethnic identities deeply divided along civilizational fault lines — an artificial country whose statehood was discounted as a passing fad. No patient with such a diagnosis qualified for retention of a nuclear deterrent. (If Mother Russia should feel empty in her imperial brothel, and should choose to reclaim her wayward daughter, there better be no ruckus, right? Yeah. No nukes for Ukes.) And nothing revealed that attitude better than bodytalk. When Clinton landed in Kyiv in early 1994, to preach a sermon of non-proliferation, he was too shy to step outside the airport.
By a twist of luck, the guy who had run Yuzhmash, Ukraine's leading defense contractor, which designed and manufactured the missiles, ended up running the whole country. Enter Leonid II, aka the “Reformer-Russophile:” the man with whom the West thought it could do business. Viewed as the icon of democratic succession of power in the newly independent states, his ascendance to presidency in 1994 reignited hopes of Ukraine's transition to a vibrant market economy. And Kuchma felt the Pavlovian drive to excel. By acceding to the NPT, with one fell swoop he scrapped those toys of terror his factory had used to make, and thereby pleased both Washington and Moscow. Schumpeter would probably marvel at his creative destruction streak: In a badly needed breakthrough for Ukraine’s starving aerospace industry, some of those toys would be reconfigured for the Sea Launch project.
Still, there was another dimension to Kuchma’s creative destruction, and it helped him win his second term in 1999 — quite a stunt, considering the political track record he had established. After Vyacheslav Chornovil, the leader of Ukraine’s popular Rukh movement — the key contributor to the collapse of communism and a major contender for the presidential post — had died in a mysterious car accident, Kuchma’s political horizon looked less challenging. The reelection campaign turned out to be a piece of cake. He simply mothballed his russophile image to position himself as the “braveheart” fending off the Red threat, a chameleon strategy which granted him the trappings of the lesser evil. It was Big Brother pulling himself together to imitate Santa Claus — or Sarah Connor, if you remember the Terminator 2 final scene. Equipped with thought control machinery, Kuchma’s political factory mass-produced fools. Contrary to the movie analogy, the masquerade was a success — a happy end for the bad guys. And those who had invested in it probably had their wish lists at the ready.
Anyway, Kyiv bid farewell to its nuclear ambition in 1994, and following a short probationary period, those handy IMF tranches rained down. Each tranche ran in the low hundreds of millions, which equaled the production and deployment costs of just a bunch of ICBMs. In a country recovering from hyperinflation, with a glaring budget deficit and an average monthly income in the neighborhood of 40 bucks, the $800 m Ukraine garnered in 1995 was still a load of dough. Ironically, those few stray bucks that made it past the magnetic field of the kleptocrats' pockets and onto the kitchen table cured the effect, not the cause. The regime that had demonstrated marked impairment in understanding the workings of the emerging market economy would simply administer these tranches as a socioeconomic antidepressant — cover-your-anatomy mode. So, the "bucks-for-nukes" program, until ripe for autopsy, would be assumed a success by both sides. Crammed with monetarist meds, Ukraine would be firmly grounded in the cuckoo's nest. In fact, Ukraine was the chief contributor to its design. (The deepest wounds are often self-inflicted.)
Just a few months before the IMF program began, on his route home after celebrating the 50th anniversary of the allied victory in WW II in Moscow in May 1995, Clinton had stopped over in Kyiv for a quickie conversation with the “King of Creative Destruction.” No longer the shy, Ukraine-antagonistic guy he had used to be, he went sightseeing and sang lofty praises. Addressing students at Shevchenko University, he said: “In the pursuit of peace and prosperity, you have been well-served by President Kuchma and his government's bold and farsighted leadership. You should know this: As you build your future, the United States will stand with you.”
And build our future we did. In June 2000, carrying President Clinton on his good-bye Eurasian tour, Air Force One landed in Ukraine one more time — this time Clinton would check on Kuchma’s decision to shut down the notorious Chernobyl nuclear power plant. Also, Clinton would level with the grass roots: Before delivering his speech at Mykhaylivska Square, he had paid a tribute to the victims of Stalin’s genocidal famine by laying a wreath to the memorial nearby. The speech he delivered was cordial, but not nearly as upbeat as the “Chicken Kuchma” one he had delivered five years ago. It didn’t take a Michel Camdessus to realize that Kuchma’s “bold and farsighted” leadership had been an exercise in make-believe. On closer inspection, Ukraine’s political scenery revealed a striking resemblance to the aura of the Twin Peaks series, where idyllic dwelled side by side with mystery. Hopefully, Clinton associates John Podesta and Mike McCurry, dispatched to advise President Yushchenko on public relations issues, will not repeat Clinton’s perception pitfalls and will bring truly insightful advice. According to some sources, Clinton himself will head the delegation.
In Kuchma’s creative destruction series, the Chernobyl episode turned out to the most mystic. In exchange for his decision to shut down the Chernobyl NPP, Ukraine’s smoldering chamber of horror since 1986, the West had pledged about a billion dollars worth of financial aid in the construction of a new sarcophagus. But it took a whole new president of Ukraine — Yushchenko, to conjure himself up — for the West to be sure enough to revive its pledge of financial aid needed to retire the aging safeguard facility. (Now that we have a better president, you guys better cough it up before you smell the funk coming from that old ragged thing.)
Indeed, the bullish attitude in the West about Ukraine's future in the early 90s would die quietly in the dark years that followed. In an atmosphere of oxygen starvation his misgovernment created, the torch of hope that so many decent but desperate folks had bought into during the summer 1994 presidential election would soon be extinguished. Ukraine was going nowhere. Expect no light at the end of the tunnel if you make a tunnel visionary your man. Reform rhetoric, so vocal in Kuchma’s campaign, turned out to be a joke. Embarrassingly, enough, for many true-blue friends of Ukraine, it now looked like the "bucks-for-nukes" program had metastasized into a “crooks-for-nukes” form. And those five more years Kuchma managed to wangle in 1999 were not a joke.
As globalization became a buzzword among elementary schoolers and antidumping lawsuits against Ukraine piled up worldwide, the WTO issue collected dust at the lowest rungs of the regime’s agenda. Amid the Gongadze and Kolchuga scandals — now widely believed to have been masterminded by Moscow — the outcast regime sported single-digit approval ratings and serenaded the Kremlin in exchange for the grass roots support it lacked at home. A follow-up master plan by Moscow aimed at dominating the former Soviet republics, code-named the "Common Economic Space," was the valedictory Russia card played by the Kuchma regime. Now that Kuchma & Associates have been past their political prime, the status of the CES project has been reduced to something of a jacuzzi for massaging Putin's ego.
So who really cared about the WTO during the last dozen years since the talks began? Marinated in us-against-the-West communist ideology, the apparatchik pioneers of crony capitalism had more important things to do. Latin American soap operas, which rocked the nation, provided a perfect smoke-screen effect whilst they jumped onto the privatization bandwagon. Privatization — aka “prykhvatyzatsiya,” an apt wordplay stemming from prykhvatyt, Ukrainian for grab, hoard, pocket, rig — will always be remembered as the legend of Ukraine’s laissez-faire landscape. In retrospect, it comes across as the overnight gravy train of the roaring 90s that delivered Ukraine's nouveau riches, en masse, via nepotistic arrangements between government and business. Meanwhile, the dudes who had stayed glued to the screen studying the colors of the Latin American way of life in shows like Los Ricos Tambien Lloran (The Rich Cry Too) missed that train. They would be the ones doing most of the crying in this country. (Caramba! Ahora los Ucranios tambien lloran, pero no estàn ricos.) And here they stood, holding a bagful of privatization certificates (aka “vauchery”) not worth the paper they were printed on. Capitalizing on the naivete of their holders, the mushrooming pyramid schemes would feast on them.
Later on, the new millennium's steel exports frenzy produced a small cadre of Forbes-rated billionaires. Rampant corruption, the hallmark of crony capitalism, was suddenly redeemed by dazzling double-digit growth rates. The resulting imagery appealed to swarms of offshore gold-diggers. They set up their Potemkin village operations with, say, $500 in startup capital, hooked up with the local tax office, and cooked the books. They kept it simple and stupid. Citing a bigtime but bogus export transaction, they filed for, say, $50,000,000 worth of VAT rebates. Bingo. Next, they split the profit with the “ground support team.” Or, perhaps, depending on the scale and scope of operations, they split it with the good old guys further up the fraud chain.
Forget all that “global village” garbage. Knowledge-based economy, human capital, WTO, Nasdaq. That sucks. Learn the essentials of tax optimization, VAT voodoo, tax-free zone ufology, and money laundering. Bring your friends. Explore the gold vein of Ukraine’s shadowy economy.
Ukraine’s export model looks anything but sexy, even though sex has been an outstanding feature. In addition to such low value-added traditional exports as steel, textiles, and agricultural produce, Ukraine’s contribution to globalization also features the 5 B’s:
Brain drain: tech-savvy talent
Bride drain: beautiful and bright
Brawn drain: skilled blue-collar workers, white-collar workers employed as blue-color workers
Bordello drain: women who became victims of modern-day slavery
Blood drain: military personnel on peacekeeping missions
Guys who winded up in the Silicon Valley and girls who met their Prince Charming, no matter how homesick, are the chart’s winners. The plight of the latter three categories has been most noteworthy and statistically significant. Millions of girls and guys, many of them college graduates, who never found a job and fled their country in search of a decent living. And many of them would find their way back home in a box.
Those who have managed to survive — who are they, geographically and demographically speaking? They are a living story of Protestant ethics, even though most of them are Catholic and Orthodox believers. They are the men who test their spirit and stamina in the construction industry in the Czech Republic, Poland, Portugal, Russia, Spain — at rates, and in conditions, even the most desperate of locals would not accept. They are the men who risk their lives in Iraq, Kosovo, Lebanon, Liberia, Sierra Leone — for a fraction of the price Westerners command. Ironically, had they stayed home, they would have never risen above the poverty line, earning just a fraction of what the UN pays them. They are the women in their thirties and forties who toil the years away as live-in maids in Italy. Many of them used to be teachers and doctors in small town Ukraine. They are the women in their twenties who staff bordellos from Athens to Amsterdam. Every now and then an odyssey of magic escape from slavery emerges in the press. Still, one can only guess at the number of less fortunate women.
The money they send via Western Union to support their families in Ukraine puts them in the “hall of fame” of Ukraine’s investors. Over the 14 years of the country’s independence — as billions of dollars worth of “privatized” public property walked out the door, making Ukraine a world-class capital flight zone — these men and women have invested in Ukraine. And if there were a way to compensate the guys in the “hall of shame” for their disservice, they would deserve to be chained to those 5B jobs for the rest of their lives, without the right of parole. And, of course, few of them would qualify for either brain- or bride drain topgrade jobs.
Being a good, socially responsible citizen was never a key success factor in corporate Ukraine. Business and society drifted worlds apart. Those inhaling the aroma of the privatization pie saw a “promised land” where money didn’t stink. Those on the rear end saw a toxic desert where every drinking fountain was marked as “oligarchs only.” Even during the peak growth year of 2004, living standards in Ukraine remained among the lowest in Europe, with pockets of poverty that resembled Africa’s. Based on the purchasing power parity, Ukraine’s GDP per capita runs at $6,300 versus neighboring Poland’s $12,000. Overall, the population has declined from 52 million in 1991 to this year’s 47 million. Ukraine lags Europe in life expectancy, and leads in the AIDS epidemic. Every day, an average of 30 Ukrainians contract HIV, and the number of those who already have is nearing 2 percent of the population. Meanwhile, the number of households enjoying an EU-compatible middle class lifestyle has been expanding but contains just one or two top quintiles. (Research offers no reliable data.)
Struggling for air, aspirants to the Ukrainian Dream flocked to Maidan, their oasis of freedom, and made the world’s headlines. EU bureaucrats like Günter Verheugen and Romano Prodi never knew what hit them. Hardcore Ukraine-skeptics, they found themselves stripped of the public relations firepower with which they had tirelessly pounded the “values gap.” The West discovered that the Ukrainians were not such a barbarous nation after all. Even EU-US and Old v New Europe tensions, exploited by Europe’s anti-American, pro-Russian left, could not harness a country changing itself in real time, eager to become more than just a neighbor. Those reporters and bloggers who tried to sell liberal audiences on the idea of a CIA role in the Revolution did a poor job. At least, they should have documented those hilarious slice-of-Maidan testimonials from would-be First Lady Liudmyla Yanukovych. A question to folks overdosed with Russia at Ukraine’s expense: Would there have been any such thing as the “baby boom” had Uncle Joe pioneered the atomic bomb? Of course, but they would have called it the “baby barbecue.” On the other hand, if the Uncle Sam enjoyed nuclear monopoly for a few more years, it would not have made things any better for civilization. No such thing as the Internet would have come into being at the pace it had. With the USSR bombed back to the Stone Age, why try harder?
Politically, socially, and economically, the Ukrainian Dream was codified as:
No more criminals in charge of this country; one man, one vote
Equal rights and opportunity for all, not the select few
No more crony capitalism; prosperity for all willing to work for it
A lot of grass root Yushchenko and Yanukovych supporters shared this common denominator, which helped avoid large-scale confrontation. It was the next script that polarized them. Organizationally, the mainstream Maidan version of the Ukrainian Dream was probably codified as:
EU: ultimate perfection, long-term goal
NATO: security umbrella, medium-term goal
WTO: prosperity via mutually beneficial trade and FDI, short-term goal
As the Orange Revolution approaches its first anniversary, it will find millions of rank-and-file revolutionaries in dismay. Except for the Kryvorizhstal sensation, freedom of speech advancements, and exiled thughunt, their dream has been deferred. These days, Maidan reads “May Day!”
Back to the future: Where do we go from here?
An old Chinese proverb has it: “When two tigers fight, one is killed and the other is crippled." As long as the jungle sustains more than two tigers, whoever gets crippled will never be a winner. No other proverb rings more true in the face of the upcoming parliamentary elections, a contest that will showcase a rematch between the two tiger camps, orange and blue. Mounting the ring — a more apt analogy would be catwalk — in a balkanized fashion — with a trail of broken promises and a quarrel with Maidan — will hardly be a winning strategy. So are the orange ones ready for the rematch? Here’s a small checklist:
Did we — the folks freezing out there day and night in anticipation of a Tiananmen-style crackdown — pose as cheerleaders for Mr. Andrew Yushchenko to mess around in a $130,000 BMW of unidentified origin? Did we volunteer ourselves as an audience for his father to throw defensive tantrums and offensive tirades?
Did we vote for a ticket to a reincarnation of crony capitalism? Did we squeeze our way to Maidan, starry-eyed, on Inauguration Day just to see Yushchenko’s dream team blast itself apart in a volcano of scandals about half a year later?
Did we Kyivites — the secure base, the homemakers of Maidan — buy ourselves a hands-off housing policy that lets urban developers and real estaters gang up on us in tacit agreement? Did we patronize Maidan to earn a 30 percent price increase in 2005 alone — in a market that had already priced apartments out of reach of the fledgling middle class? Did we shake the invisible hand that created prices unheard of in Warsaw and Prague, and margins undreamed of in London and New York?
Did we ever expect him to make deals with the smoking gun of election fraud? Did we advocate a protection program that effectively lets the crooks off the hook?
Or did we subscribe for a gig in the “Orange Blues Band” — one that would fire up the anti-American Street to gleefully pelt us with rotten oranges?
No! A chorus of millions of no’s to all of the above! We were there because Yushchenko represented our interests, and we trusted him to do just that, period. Hence, our right and responsibility: Make that wake-up call, remind him of the bond of trust he had made with us.
The fitness issue requires a lessons-learned, physician-heal-thyself perspective. Let the power of 20/20 hindsight light the way. In the political taxonomy of Maidan, the “orange oligarchs” were a fact of life: a cost of putting the old regime out of business. The cash and connections they brought to a vastly outfinanced campaign were an asset. But the ultimate asset that set us apart from the competition and brought us victory was human capital: visionary, vibrant, and vocal.
Had money been the primary source of competitive advantage, the good would have never overcome the evil: The “bad blue boys” had a fabulous financial forte. Still, they had overestimated the benefit of running as the heir apparent to a brain-blocked, brutal, and bubble-gum regime. With Maidan in full swing and then-Secretary of State Colin Powell on the line from Washington, they scrapped the “Tiananmen option” and called it quits. A witty slogan got born: “Dobro peremoglo bablo!” (“The good has overcome the gravy.”) That’s the way the story goes, in simple terms.
Following the inauguration, the “orange oligarchs” should have gone off-stage, or at least “off-duty,” thus fulfilling a core campaign promise: that business and government should not stick together. So far, that promise has gone unfulfilled — like many others. Caught in a whirlpool of competing claims to fame in what appeared to be a shallow pool of top talent, the incoming administration had chosen to keep the old covenant afloat in some sort of way. This piranha-eat-piranha preserve of crony capitalism was bound to bottom out. And before it did, some serious fish fighting was about to occur.
It all began when then-Justice Minister Zvarych, a loyal and intelligent Yushchenko associate, threatened to resign. No, it wasn’t because the PhD degree heretofore ascribed to him had gone missing. (At Pravda.com.ua, the flagship of pro-Yushchenko blog media, the “résumé gap” earned him the title “Orange ProFFessor.”) By threatening to resign, he probably meant: “Get off my wife’s back!” And he meant business: He could not come to terms with a cabinet regulation that hurt the oil business his wife was employed in.
After this first-blood episode, the pool became a fishbowl. Veterans of Maidan would get the impression they were watching a “discovery channel” where their heroes posed as the greediest of animals. (But hey, wasn’t the new administration more transparent, after all?) Amid rising inflation and falling GDP, turf battles between PM Tymoshenko and NSC chief Poroshenko would send Maidaners into a state of agonizing self-doubt: “Gee, these guys we’ve brought to power are not that good.”
The scandals snowballed. Cognitive dissonance surged. Approval ratings plunged. The conflict escalates to the point where second-echelon forces engage: President's chief of staff Zinchenko heads for the escape hatch and blows the whistle. In his exit interview, he accuses NSC chief Poroshenko and presidential aide Tretyakov of corruption and excessive gate-keeping. No other “depth charge” came as close to home, and the “mother sub” exercised the all-out option. Witness the “orange big bang.”
So who’s who in the bipolar fishbowl of the orange oligarchy? Who’s more likely to be perceived as an “on-duty” oligarch? Who has more of an “off-duty” image? And how does that affect Ukraine’s chances of entering into the WTO? Most voters just scratch the surface: They do their profiling based on an interplay between public image and their preexisting beliefs (low-involvement/emotional base). The more sophisticated ones go deeper: They tune their sonars and probe for political karma. (high-involvement/rational base).
Merging these two methodologies and omitting a wealth of factual detail, Poroshenko is more likely to be perceived as an “on-duty” oligarch. Even though investigators have cleared him of all charges, Poroshenko simply has more dents in his credentials than Tymoshenko. By virtue, or vice, of being the most visible figure in Yushchenko’s inner circle, and a primary campaign donor, Poroshenko raised what might be called the “return on investment” hypothesis. Although, prior to assuming his post, he had claimed to have ceded operating control of his businesses to a world-class consulting firm, few would accept that statement at face value. The incoming Zinchenko report brought a storm of negative publicity that had a ripple effect on a President whose exposure to charges of cronyism had already been on an upward spiral.
Irony aside, it turned out to be a double-bind situation: If you turn your friends down, you lose them; If you appoint them, not only do you lose them, but you also lose yourself. In retrospect, making Poroshenko the commander of the parliamentary campaign corps might have been a better idea. While hardly an ego boost at the star time of trophy distribution, the value of the mission has now appreciated. Once the power shifts from the President to the Prime Minister, it will be a whole new ballgame. In the tricky terrain of the so-called politreforma (political reform) scheduled to go into force next year, defeating the “Rada Armada” will be no trifling mission. (How many Ukrainians who voted orange in fall 2004 will do so in spring 2006?)
In contrast, Tymoshenko — whose charms and passion for fashion may irritate housewives, yet energize business women, and whose piecemeal economic policy may enrage market fundamentalists, yet appeal to the common folks ripped off by the Kuchma regime — is more likely to be perceived as an “off-duty” oligarch. The First Lady of Maidan ranked third most powerful woman in the world, according to this year’s rating by Forbes magazine. Her controversial “energy empress” background and strange personal income reports can only be matched by her record as the “enemy of the shadowy economy.” As Vice Premier for Energy in the Yushchenko 2000-01 cabinet, she unplugged a set of billion-dollar barter schemes used to milk the energy-guzzling economy.
That feat stands out vividly as one of the greatest achievements of the Yushchenko cabinet. With not a cent in the way of IMF loans, the cabinet not only moved a mountain of pay liabilities for millions of pensioners and public sector employees, but also became the first cabinet since 1991 to have the economy break even. Cherchez la femme. No wonder, for her role, the jewel of the Yushchenko cabinet landed a regime-sponsored vacation in jail. Her energy empire fell. Once released, she maintained a high profile, enlisting in the winter-spring 2001 “Ukraine without Kuchma” sit-ins. She also maintained a love-and-hate liaison with Yushchenko, whose balancing act cost him a hilarious faux pas, when he was caught referring to Kuchma as his father figure. Yushchenko dodged the 2001 part and joined the fall 2002 “Arise Ukraine” street protests as a guest speaker.
When she became PM, it was payback time for unfriendly oligarchs. She pumped up budget revenue by targeting tax evaders and embarked on an ill-planned and ill-marketed “reprivatization” campaign. Not a bad idea if done right, it went overextolled and underexplained from day one. Meanwhile, the oligarchs whose businesses were in question mobilized their public relations hit teams. They skillfully sabotaged it as “renationalization,” a bugaboo for investors. Tymoshenko’s lovelorn, “orange mail” visit to Moscow following the “big bang” offers a demo version of her alliance building skills. (Mr. President, don’t let the “Lone Ranger” team up with the wrong “Loan Arranger,” because if she does, such collateralization will convert the Orange Revolution into nothing more than a souvenir. It’s either a reunion in harmony or a rest in peace. Be good to each other and don’t forget about us.)
Thankfully, the President chose to keep the reprivatization door open on Kryvorizhstal. Sold in a live broadcast auction to the highest bidder, not the highest rigger, the steel mill made a bestseller and an eye-opener. Yet the reality show scanned only the tip of the iceberg in the netherworld kingdom of twisted mirrors erected by an architect whose identity is well known.
How much better off would the Ukrainians have been if those state-owned enterprises had been sold at a fair market price? Hadn’t they financed them with their taxes? How many thousand dollars would the privatization have added to Ukraine’s GDP per capita if it had involved world-class players? Tymoshenko, who savored her cheerleader role for Mittal Steel before the camera, once again established herself as the Joan of Arc of Ukrainian politics. Her reprivatization platform — if refined to a rational, law-based, and across-the-board status — will hardly be discredited as degenerate, tit-for-tat, “bread-and-circus” populism. Anything wrong with “equal rights-and-opportunity” populism in a depopulating country? Attention thinktank elves and migratory do-gooders! The value proposition of the Orange Revolution did not include a disoriented, depopulating Ukraine. Don’t you count on us as a masochistic ghettoful of cheap labor. We’re not staying where we are. Don’t you hang around with the “bad blue boys.” It doesn’t matter what they did as long as they behave, so you say? What about Kenneth Lay of Enron and Calisto Tonzi of Parmalat, both of whom are scheduled to go on trial? What about Bernard Ebbers of Worldcom, who is already doing his 25-year term in jail? Fiat experimentum in corpore vili? Hey, why don’t you play more golf and keep the double standard out of Ukraine?
The Kryvorizhstal resale has crystallized into a good publicity springboard for Ukraine’s entry to the WTO. For a country in need of modernizing and diversifying its economy, an open door, level playing field policy has no substitute. Ukraine’s membership in the WTO, so remote and obscure in the good old days of the privatizationfest, now looms large for oligarchs of all sorts. Of course, for those who profited mainly from the privatization principle in what became a cozy, insider economy, vistas of the WTO were always more intimidating than inspiring. Now, the world has moved on. The realization that they’re either selling to WTO markets or threshold countries slowly filters through. With little left to privatize and Mittal Steel’s intervention reverberating through the Jurassic Park of Ukraine’s economy, holding out is no longer a viable strategy. How do they breathe new life into their commodity dinosaurs before they are tossed into the global waters of corporate Darwinism? Fames est optimus coqus, the Romans used to say. Hunger is the best cook. Indeed, there’s no stimulus — and survival kit — like competition. As Arie de Geus, head of planning at Royal Dutch/Shell in the 80s, put it, “The ability to learn faster than your competitors is the only source of competitive advantage.” When it comes to a world awash with change, one cannot just barge in with a bunch of prehistoric business skills. Capitalizing on continuous learning and elaborating on best practices will be key to crafting country- and industry-specific strategies.
By the way, how are the world’s best companies doing? Tangible assets (land, buildings, equipment, etc) no longer account for most of the value added in the US economy. In the $12 trillion knowledge-based economy, the manufacturing sector occupies a mere 11 percent. No wonder, intangible assets (patents, copyrights, brand equity, etc) carry the day. And of course, the ultimate asset responsible for generating these is the knowledge worker. Too good to be true for Ukraine? If this applies to mature, postindustrial economies, it will also increasingly apply to growth economies. Unless you don’t want to grow up, pay attention. The world’s best companies win the money game by winning the war for talent. They hire the best people, give them the tools, and pay them well. In return for their investment in human and intellectual capital, they excel as dynamic, diversified, innovative, NYSE- FTSE-listed, socially responsible enterprises. They constantly reinvent themselves. The are the best to work for, the best to buy from, the best to partner with, and the best to learn from. The are the business world’s pacesetters like GE, 3M, FedEx, Nordstrom, to name just a few.
In the global economy of the 21st century, few companies will propel themselves to the big league by feeding on dated technology, nurturing a father-knows-best culture, plundering and polluting the environment (the “polluter prospers” principle), paying scanty wages, and hoarding profits in offshore banks. We’ve had enough of this saga in our country. That’s why the shape of Ukraine’s much-eroticized industry needs a hard look. Here’s a good case in point. As a percentage of total costs, labor comes at the very bottom of the cost buildup. Not so with energy: According to experts, Ukraine consumes more energy per dollar of production than any other industrialized country. Coupled with skyrocketing world energy prices, the commonplace energy-guzzling hardware has grown a black hole in the economy. And that black hole invites blackmail by chief energy supplier Russia. In this regard, cutting costs makes a lot of sense. One cannot compete with WTO manufacturers by toying with plant equipment that has a “Made in USSR” label on it. Nothing short of state-of-the-art, energy-efficient equipment will work. Yet the productivity gains may be eroded if management underinvests in training and continues paying low wages. In an environment of advancing technology, a disgruntled, dehumanized workforce destroys more value than that created by reliance on dirt-cheap labor. Finally, Ukraine, whose Industrial Revolution began in the 19th century, should graduate from her Cinderella role in the global division of labor and diversify into value-added, high-end markets.
Here’s Ukraine’s trade outlook in a nutshell:
Aeronautics: best value for third world markets; partnerships with the West
Agriculture: fertile land, robust railroad infrastructure, access to sea ports, low costs
Defense: tanks, missiles, radar equipment, etc; brand equity in third world markets
Software: strong techie schools; could become a Eurasian Silicon Valley; outsourcing opportunities
Shipbuilding: vast engineering talent pool; low costs
Steel: rich deposits of ore; proximity to the EU; opportunities in the US, CIS, third world markets
Textiles: outsourcing opportunities
Empty-handed? Not really. Still, when knocking on the WTO’s door Ukraine should be armed with SWOT and PEST analysis. After all, luck is where opportunity meets preparation. Business and government should have a workshop to make sure Ukraine’s ambitions do not end up in the wastebasket. They have to learn together to maximize long-term gains and minimize short-term losses: so that it gets better before it gets worse. According to Economics Minister Arseny Yatseniuk, membership in the WTO will add 1.9 percent to Ukraine’s GDP and a 30 percent increase in FDI. Experts believe agriculture will bear the lion’s share of the short-term losses.
Besides the negotiations, major roadblocks to overcome include obtaining market economy status from the EU and the US (expected timeframe: December 2005 and early 2006, respectively). According to US Ambassador Herbst, the Jackson-Vanik amendment may be lifted simultaneously with Ukraine’s accession to the WTO. As a gesture of goodwill, which coincided with the first anniversary of the Orange Revolution, the Senate has laid to rest the amendment, pending approval by Congress and President. Until then, the Cold War relic had come handy as a bargaining chip for Washington in promoting its agenda. Washington urges Kyiv to strengthen intellectual property rights protection and ease imports of US-produced poultry involving genetically modified feeds. Easing exports of Ukraine-produced leather, scrap metal, and sunflower have also become a sticking point. Australia remains adamant in its goal to supply raw sugar to Ukrainian refineries, and seeks appropriate quota cuts. With Russia breathing in Ukraine’s neck, in what looks like a race for first-mover advantage, Ukraine should strike common ground in the negotiations as soon as possible. Of course, winning the championship is a safer scenario for Ukraine. Yet the country should not cave in to grossly unfair terms in pursuit of it. In this dilemma, synchronized accession — if properly negotiated — provides a fall-back option. Rather than exhausting each other, “scoop-thy-neighbor” style, the Czech Republic and Slovakia became members on the same day, January 1, 1995, two years after their marriage dissolved.
Friends of Ukraine should pitch in. A “No Ukes Left Behind” campaign should permeate the Washington bureaucracy. The Miller-Pifer tandem should move into full gear. If Dubya “misunderestimates” Ukraine’s value as a beacon of democratic change in a world where crusading Fortress America has ran into rocks, Puttie Put will have a field day — and so will the axis of evil. (Should parallels be drawn, ignorance, not the iceberg, wrecked the Titanic.)
The rest is homework. What needs to be done? The ruling party should awake to the reality of waning approval ratings. Given the baggage of bad publicity, the ballot balloon they set their hopes for will hardly get off the ground. When the numbers get tough the tough get going. The not-so-tough stick around until the pendulum of public opinion drags the whole thing down the drain. Whether you like her or not, the Lady of Maidan already leads Kyiv, which supports the “brand-switching” hypothesis. Indeed, since the “big bang,” Yushchenko and Tymoshenko have demonstrated to be reversely proportional in terms of approval ratings. And the trouble is, as they exchange friendly fire, the sharks that missed their target in the last election smell blood. Even if Tymoshenko (anecdotal analogy: Evita Peron) looks stronger than Yushchenko (anecdotal analogy: Jimmy Carter), both will lose if they split the already flailing Orange Revolution at the polls. Unless they work out a modus vivendi, the Orange Revolution will turn out to have a miserably short half life. Hence, the turn out issue looms into view: How many will not care enough to come to the polls? Why dream of something that has decomposed? How many will find a new meaning in life by switching to Yanukovych? Why forget the growth rates his cabinet boasted? And, yes, on the eve of the first anniversary, he tops the nationwide ratings. (If this is not dystopia, then what is?)
Tymo the Maverick Martyr and Yushie the Vainglorious Voyager should immunize their fragile egos with 360-degree feedback. They should beat their turf battle swords into electoral plowshares. Enough of this backbiting. Keep the spirit and synergy of Maidan alive! Don't let a good idea go bad. We were there for you. Be there for us. If you choose to go solo and venture deep into “new territories,” your home base supporters may quit in droves. If you try to be all things to all people, you'll end up being nothing to everyone. Platform hybridization helps only if it does no harm. The more mistakes the orange ones make, the juicier the marketshare of the blue and red ones in Ukraine’s kaleidoscopic marketplace of ideas. The icier the isolationist belt in the new makeup of the Rada, the shriller the siren calls of the Russian lobby, and the stronger the stonewalling of WTO-related bills. (In the accoustically rich culture of Ukraine's parliament, sirens have become a literal phenomenon.)
A weak Yushchenko economic policy will concoct a Rada whose economic thinking will stretch along the “Khmer Rouge-Moulin Rouge” continuum. Performed on a kitchen table of bleak reality and disenchantment, such déjà vu hemisphere lateralization will do Ukraine no good. It will possess a Frankenstein prime minister whose rallying call will be “Mir! Trud! Maybach!” Scary? Don’t let it happen. Run, Forrest! Run!
“The Orange Revolution has to be put back together,” says William Miller, US ambassador to Ukraine from 1993 to 1998. Western mentorship prgrams, as applied to the old regime, often suffered from myopia and fell on deaf ears. But now that Ukraine has a more Westernized office of president, William Miller makes a good point. The folks of different walks of life who did it last year should wrap their minds around the back-to-orange, back-to-the-future movement. WTO membership offers no panacea. Still, if well and timely negotiated, it offers a position that will bring us closer to the Ukrainian Dream. Free trade works better than free aid. Ancient Greece, the bedrock of Western civilization, consumed bread made from Ukrainian wheat. 21st-century Ukraine has more talent in store.
Sunday, November 27, 2005
The Ukrainian Dream, the Orange Revolution and the WTO