After a two-year hiatus, The Economist has finally updated its Big Mac Index.
Since 2007, Ukraine's currency, the hryvnia, has lost 50% of its value against the dollar. The change in the hryvnia's undervaluation has been less dramatic but remains staggering: from -41% to -49%.
While not scientifically precise, this rate makes for good comparison shopping: It makes Ukraine a Third World country.
It comes on the heels of just about every other index that leaves us far behind the developed world, despite Ukraine having an aerospace industry.
And as world metal prices are picking up, it comes as terrifically good news for our energy-inefficient commodity-cursed oligarch-controlled McDonbas economy.
Ours is an economy that thrives on cheap labor and cheap natural resources. The outcome? Poor living standards. A net population loss of more than 6 million people during the last 18 years.
Why reform? Why fight corruption? Why invest in energy-efficient equipment? Why diversify the economy? Why pay Ukrainian workers decent wages if they can survive on $300 a month without protesting like those German workers who make $30 an hour?
Just pay the damn Ukrainians their slave wages. Don't let them earn enough to buy homes. Let them blow up in coal mines. Let them drink. Let them stay depressed. Let them die out so we can have the land, too. After all, unless they can make us treat them better, they deserve no better treatment. Therefore, let 5 percent of the population prosper and let the rest struggle.
Meanwhile, we the oligarchs can pollute, we can exploit and we can export. We can pump billions of dollars into offshore accounts. Hell, we can even spend a few million dollars on charity! Just keep the hryvnia undervalued. Let the Ukrainian Dream remain just that — a dream!
Sources:
http://www.economist.com/businessfinance/displaystory.cfm?story_id=14036918
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7 comments:
I think Hungarian Forint is geting slightly stronger compared to the dollar. I can't prove it with numbers, just my memory. However in the mid 1990s Forint was much weaker. Forint had an other weaker session in the end of last year but recently it has been flying. We will see what happens.
I am not an Ukranian, but what I experienced, that people always complain. They complain in much wealthier countries than ours (Germany, US) about something , but they can't see, it could be much worse. For example in january Obama mentioned Ukraine and Hungary as one block (well some politicians weren't happy about it because according to them these statement weakened our currency) and in Hungary life is not that horrible. There are poor people but they are everywhere. I am a middle class student and I can't complain. However my parents work hard.
Well Ukraine already had problems with a current account deficit before the crisis, a stronger hryvnia would certainly not have been a solution.
"Hell, we can even spend a few million dollars on charity!"
Not only on charity: that list can include pretty expensive watches.
I really hope Ukrainians can deal with the situation. In the late 80, the Peruvian sol experienced a hyperinflation, comparable to the one in Germay after WWI. We know the feeling very well, we have been there.
Ropi,
The forint looks good to me! It reflects Hungary’s stronger purchasing power and stronger reliance on domestic consumption (as opposed to Ukraine’s undervalued hryvnia and reliance on commodity exports).
When I was a student, I thought I'd be middle class by the time I reach my current age. I was wrong:) I’m not middle class: I can’t afford to buy my own home. Home prices in Kyiv, despite a 30% drop, remain stratospheric.
I learned about Obama’s pairing of Ukraine’s and Hungary’s “emerging markets” thanks to Global Voices in March. Eva Balogh of Hungarian Spectrum: “How does Obama dare to compare Hungary to Ukraine!”
She probably means that:
(1) Lumping Hungary and Ukraine offends her; and
(2) Ukraine cannot be a yardstick for measuring Hungary’s wellbeing.
Extrapolated, this probably means that she would have complained much harder had she walked in Ukraine’s shoes.
So, as we can see, complaining has its communication value:)
Sublime Oblivion,
Of course, revaluation would be bad in times of crisis and negative balance of payments.
I’m in favor of measured appreciation as a result of reform. We need to change our economic model: from a commodity economy to a knowledge economy, one geared toward innovation and domestic consumption.
Gabriela,
Yeah, watches don’t lie.
Ukraine’s hyperinflation wasn’t the worst in the world, but it certainly turned Ukrainians into millionaires. In spring 1994, one U.S. dollar cost about 45,000 karbovantsiv. On December 1, 1995, it cost 178,700 karbovantsiv. Therefore, $6 — and you’re a millionaire!:)
I’m glad Peru brought Fujimori to justice! This should set a good rule of law precedent for your country and perhaps even its neighbors. As a Ukrainian, I wish we could bring our own cadre of former presidents to justice too.
When I first went to Ukraine, it was already hryvnia time -- so I never saw the preceding hyperinflation. As a Brazilian, though, I certainly remember those times: Brazil changed currency four times and "cut off" the last three zeroes of prices at least eight times in a few years' time. I certainly remember very well the feeling of going to a newsstand to buy a comics book a few days after I saw it only to be informed it is now 30% more expensive and my money is thus not enough to buy it...
Ukrainian Journal - August 10, 2009
Recent statements by Prime Minister Yulia Tymoshenko to the effect that the hryvnia should trade at a rate of UAH 6.0-6.5/USD 1 were made under pressure from lobbyists for banking interests who want to receive cheap currency to pay foreign debts, according to Ihor Burakovsky, director of the Institute for Economic Research and Policy Consulting. "It's obvious that these are people who are affiliated with the Ukrainian banking system and who need to return large foreign debts," he said. "The average weighted hryvnia exchange rate this year would fluctuate from UAH 8.5-9.1/USD 1... A poor economy cannot have a strong currency," he said.
Lingüista,
You have hands-on experience with hyperinflation!
I remember watching The Sandpit Generals (then a popular propaganda film) as a Soviet kid. Little did I realize how close we were to becoming sandpit generals ourselves, once our “developed socialism” would turn into “developing capitalism.”
Leopolis,
“A poor economy cannot have a strong currency.” A corollary of this statement would be “A poor economy suits a weak currency.”
I'd love to have Tymoshenko or any other Ukrainian official comment on the Big Mac Index.
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