Entrepreneurship in Ukraine, a History and Analysis

A paper of mine was recently published. Co-written with Dr. Judas Everett, we explored the history of entrepreneurship in Ukraine, and some issues surrounding the increased marketisation of Ukraine. While The Economist has just forecast that Ukraine’s economy is showing very healthy signs, and I have talked about some strengths of the economy before, the government has embarked on some strong reforms which, while may have good intentions of decommunisation, modernisation, attracting post-war investment, and growth, could jeopardise the country.

It is a blend of historical and policy analysis alongside some theoretical discussion. I used my theoretical background to argue that many of the policies are rooted in a quasi neoliberal foundation, which is not necessarily desirable, especially in the context of a nation which does not have fully functioning institutions. It raises many further questions around transitions in countries with deeply non-ideal background conditions. It is actually somewhat bizarre to me that few political theorists and philosophers examine Eastern Europe as a whole.  

One classic view, which we counter, is that Ukraine struggles to adapt to capitalism merely because it lacks a history of entrepreneurship, but my co-author arduously shows that is not the case at all. There is a rich history of small scale entrepreneurship in Ukraine, the issue is the lack of proper institutional support and, as we both point out, a coherent approach to economic matters. We aim to start the proper discussion on this issue. 

Many policies have weakened unions, taxes are increasing on small business owners, while worker rights are diminished and pensions are minimal, and probably will not be something in the future for many working now. A substantial number of workers in Ukraine are contractors, and rather than giving them flexibility they often beholden to the contracts with little legal recourse. At the same time, we still see many bloated institutions and a lack of faith in them, meaning that it is difficult to sufficiently regulate. If a country wishes to marketise further, there still must be some welfare safety net, effective institutions and regulations, and measures against corruption. Ukraine is putting the cart before the horse. 

Many former communist countries experienced the wild 90s, a deeply corrupted and unofficial capitalistic hellscape, which benefited a few, however, over time, many have gone to successful nation states with robust economies alongside reasonable welfare states. Ukraine struggled to do this in the same way. It appears they are trying to catch up, but the solutions may not achieve the desired goals, rather, entrench wealth, diminish social mobility, and make the worst off even more precarious. We can see this both by examining realities of countries with safety nets, alongside theoretical issues with proponents of heavily marketised economies and societies. 

In the context of the war, Ukraine has to make hard decisions. However, in times of war, some state involvement and a robust welfare state is essential. There will be many unable to work with trauma, injuries, and disability. Workers who left abroad will need an enticing reason to come back, and it is unclear if a precarious position will do that. We make a case for a different kind of  model for a more successful transition, which upholds proper liberal democratic norms of appealing to all, benefitting the worker and the business owner, and increasing social mobility. It will take time, and much more work needs to be done, but it is a start. 

You can access the article here:  https://hrcak.srce.hr/clanak/467510 

More work needs to be done on policy, and it is a fine line between recommendation and lecturing another country on their direction, however, some political actionsI would consider are the following: 

1. Cut taxes on employed workers. Many workers choose to be contractors purely due to the high tax rate, waiving certain rights and provisions. It would be more liberal and an effective method to undermine corruption to do so. 
2. Maintain the FOP and ensure that small and medium businesses can have a low tax rate, to encourage entrepreneurship. 
3. Completely overhaul the regulatory bodies which have become corrupted. Rather than allowing them to be used by the wealthy to exploit other budding entrepreneurs, they should enforce actual working standards and regulations that benefit workers, owners, and the public at large. 
4. Further digitalisation of the civil service and an overhaul to inspire trust in the institutions, fire and rehire based on training, to move away from the bloated bureaucratic system. 
5. Re-implement certain worker rights that have been waived. Not only do market economies with strong worker rights exist and flourish, but it would protect workers from the inequalities that exist in Ukraine. Further, and purely on a self-interested basis, this would be in fitting with the EU requirements for certain worker rights. 
6. Increasing taxes on the oligarchs. These oligarchs exist purely via corruption, accumulation of wealth via dubious means in the 90s and 00s, and low taxation and loopholes. These oligarchs also influence the media and beyond. It is important to have a fairer playing field if Ukraine wishes to pursue a market economy.