Harvard Business Review editor Justin Fox looked at growth in Ukraine since independence and compared it to neighboring, former Soviet bloc economies, and was surprised by how much it lagged: So he called up Chrystia Freeland , former FT correspondent and now member of Canadian Parliament. Freeland was in Ukraine when it became an independent nation, and, Fox notes, her mother helped "craft the country's constitution." Here is an excerpt from the interview: Fox: The East has this old industrial base. What does the Ukrainian economy consist of on the whole? Is it heavily agricultural? Freeland: The industrial base is important, particularly in eastern Ukraine. We all know about Ukraine as the breadbasket of Europe, and it is indeed an incredibly fertile country. There’s been a lot of Chinese investment in that part of the Ukrainian economy. There is also a technology outsourcing industry. And then finally, in some parts of Ukraine, tourism has been becoming more important. Why is the economy such a mess? Because of very bad, kleptocratic governments. That is 90% of the reason. In terms of the economy, Ukraine only accomplished maybe half of the things that you need to do, when the Soviet Union collapsed and they moved to a market economy. They did do privatization. There are now a lot of private companies, and there is a market. It’s important for us to remember that not so long ago even selling a pair of jeans was illegal. But what they failed to do was build an effective rule of law and government institutions. Corruption, in the Yanukovych era at least, was absolutely rampant. And some important reforms of state finances haven’t happened. In particular, energy prices are still subsidized. Of course, when you move to free-market prices that’s a huge shock to the society. But Ukraine’s failure to liberalize energy prices is part of the reason that it has this great dependency on Russia. Having said all of that, and having been in Kyiv* last week, I think there’s a bit of an Italian phenomenon going on, where you actually have a highly educated, very entrepreneurial population, but because you had this incredibly corrupt state, a lot of the Ukrainian economy has gone underground. Walking through the streets of many Ukrainian cities — Kyiv, Lviv in Western Ukraine, Dnipropetrovsk in the East — you feel yourself to be in a much more prosperous society than the official data reflect. The official data is incredible. Poland on the one side and Russia on the other are both in the low twenty-thousands in GDP per capita, and Ukraine is officially at $7,298. There is no doubt that Ukraine has fared much, much worse than Poland. That is a testament to how important government decisions are. These countries were not so far apart in 1991 when Ukraine became independent, and the Poles by and large have done the right things, and the Ukrainian government has not. Read the full interview here .
Filed under: Russia, GDP, growth, trade, Chrystia Freeland, oil, gas, Romania, Poland, putin, russian economy, costs of war, sanctions, crimean crisis, ukraine, black sea, vladimir putin, crimea, belarus, oligarchs, Viktor Yanukovych, growth laggard