Ukraine is stuck in a post-Soviet condition

It is common to speak about Ukrainian politics as being defined by a ‘Russian nationalist’ East and a ‘Ukrainian nationalist’ West. This language permeated the popular press during the tumultuous Maidan protests, with commentators suggesting that even if Maidan’s protesters won in Kyiv they would surely face recalcitrant Russian separatism in the Eastern regions. Yet, as Maidan moved to victory in Kyiv, in Eastern Ukraine, resistance from the supporters of the Party of Regions in the East virtually disappeared. Why, if Ukraine is divided along ethnic lines, did the population and elites of the Eastern regions switch sides so quickly? Because Ukraine is not just divided along linguistic or ethnic lines, but by its two different economic systems: the more prosperous East carries the political legacy of Soviet heavy industrialisation, while the less developed West is relatively free of such political burdens.

Soviet Ukraine 

The regions that were bolted together by Stalin in the wake of the Soviet triumph over Nazi Germany were very different.

Ukraine’s current boundaries were not set until 1945, when the Eastern parts of what had been Poland (and smaller parts of what had been Romania) were added to the Ukrainian Soviet Socialist Republic, in the aftermath of the Second World War. However, the regions that were bolted together by Stalin in the wake of the Soviet triumph over Nazi Germany were very different. One was a Soviet industrial heartland whose history of development reached back to the Czarist period; the other was a largely rural society with little heavy industry.

Ukraine's gross regional product varies drastically across regions. CC Daniel KennedyThe last decade has seen a flurry of historical research on the process of ‘Sovietisation’ in Western Ukraine. The weight of this research has shown that the cultural and political project of turning peasants into loyal Soviets was extremely successful in the western borderlands. The USSR successfully co-opted and created a Ukrainian nationalism that could co-exist and reinforce Soviet identity and values. Still, the economic divide between the eastern and western regions remained: Western Ukraine remained relatively agricultural with some light industrial development, while Eastern Ukraine was a major engine of the Soviet economy, mining a vast reserve of coal, and using those resources to build a massive steel and heavy-machine industry.

This combination of Soviet management and Western financing is what I call ‘the post-Soviet condition.’

Those divisions remain today, as Eastern Ukraine provides the country’s main non-agricultural exports, which are still machine tools, steel, energy and pharmaceutical products, with the main export market still Russia and other post-Soviet states. The main change since the end of the USSR has been that the owners of these enterprises now receive profits in cash instead of perks; and move this cash into a financial system closely connected with banks in the EU. The market structure, however, and, most importantly, monopoly control and rent extraction remain. This combination of Soviet management and Western financing is what I call ‘the post-Soviet condition.’

The ‘post-Soviet condition’

The ‘post-Soviet condition’ implies a number of things; Soviet enterprises were not just sites of production, they were also the core of the Soviet welfare state. Factories, in addition to employment, also provided housing, medical care, child-care, education and holidays. Essentially, what many of the Western-minded reformers of the 1990s did not understand was that capitalist property rights would not displace this complex and embedded network of authority, perks and exchange. The post-Soviet state – not only Ukraine – is thus a weak state with extremely strong institutions and local networks; and they are especially strong in Eastern Ukraine, and have been since the death of Stalin. In fact, the entire post-Stalin leadership of the USSR from Khrushchev to Gorbachev was comprised of ethnically Russian functionaries who cut their teeth and had their powerbase in the coal and steel heartland of Eastern Ukraine.

The post-Soviet state – not only Ukraine – is thus a weak state with extremely strong institutions and local networks.

Western Ukraine, on the other hand, looked very different. Even today, it is poorer than its eastern counterpart with only two well-known industrial enterprises: a television factory and a bus plant, both of which were secondary in the Soviet economic pecking order. While the region had a large agricultural complex, this industry did not create the politically powerful networks that the East’s heavy industry did. But Western Ukraine had something else: it was the capital of the underground trade in black market goods coming in from the satellite states of Eastern Europe. That was part of its history – a multicultural and multilingual entropôt that had been part of many empires, which had naturally become, in Soviet times, a hub for illicit exchange: not only goods but also ideas and culture including Western rock ‘n roll, which was pouring in from the relatively more liberal Eastern European socialist states.

Networks

The influence of Soviet industrial relations still shapes the political landscape in Ukraine and the larger post-Soviet space. Western Ukrainians had less industry to be privatised during the 1990s, thus creating a less powerful network of oligarchs to control not only the economic, but also political, life in the region. This is not to say that Western Ukraine has stable property rights or clean politics: if the reign of Tymoshenko has shown us anything, it is that gas and transit rights can be milked by politicians on either side of the divide. However, the smaller scale of these networks meant that the same kind of hegemony over the economy and politics does not exist.

Metallurgical plant in the eastern city of Donetsk. Soviet-era industry is at the heart of informal networks. CC Andrew ButkoIn Eastern Ukraine, deeply connected networks of managers and functionaries were able to scoop up large, vertically integrated Soviet industries and their attendant networks of patronage and power. As in Russia, what post-communist reformers did not understand (or wilfully ignored) was that property rights would not instantly turn Soviet enterprises into entities with a corporate identity and long-term profit motives. The lines continued to be blurred between welfare and property rights, and the defence of the structures of the state from the profit motives of individuals and enterprises. The difference was that now liquid cash could be moved across borders into the global banking system, and used to purchase goods that the old elites could only dream of.

If Tymoshenko has shown us anything, it is that gas and transit rights can be milked by either side of the political divide.

Putin and Yanukovych

The 1990s and early 2000s saw bloody battles over control of these property rights and power networks across the entire post-Soviet world. In Russia after 2003, Vladimir Putin was able to bring some stability to this arrangement of power by amalgamating these networks into a centralised oligarchy, using presidential power to balance the interest of various Kremlin ‘groupings’ and their local patrons.

Yanukovych did something similar in Eastern Ukraine. However, unlike Putin, Yanukovych did not have the billions of dollars in oil and gas revenue to build the coercive mechanisms of the state; indeed, the financial picture is dire. One of the overlooked stories of the protests was that, by comparison with the number of protesters, there were simply not that many Berkut riot police on the street. This is a direct consequence of a lack of fiscal resources. On top of that, Yanukovych had no leverage in the Western regions because they did not play by the same set of post-Soviet rules as his base in the East. Yanukovych had the bad luck of having to rule over a hybrid Soviet economic heartland and periphery, while Putin’s Russia contains a far more uniform set of industrial relationships and power relations. The lesson is that leaders like Putin and Yanukovych are not strong dictators ruling over powerful states but in fact weak leaders of weak states balancing strong institutions.

Who wins, who loses

Leaders like Putin and Yanukovych are in fact weak leaders of weak states balancing strong institutions.

Indeed, this helps explains why the  EU Association Agreement was a spark for protests. Many have noted that the EU offer was not a panacea for all Ukraine’s many ills – requiring heavy structural adjustment for not that much return. For the pensioner living in Donetsk as well as the Eastern oligarch, this deal posed a threat to their economic security and the cosy ways of doing business. For the resident of Lviv, however, with prosperous Poland just over the border, this is a win-win situation, as they don’t have as much to lose. The same is true for young and educated people in the East, who, like their Moscow counterparts, see the only opportunities for growth, lying in a Western-style economy. Indeed, a recent article by Radio Free Europe interviewing the vying camps of pro- and anti-Maidan protesters in the East Ukrainian city of Kharkiv, presents incidental evidence that anti-Maidan protesters are older and regard their Russian-language Soviet legacy as a guarantee of financial stability, while pro-Maidan protesters are younger, less engaged in heavy industry and feel stifled by the systemic corruption that accompanies the ‘post-Soviet condition.’

Veliky Bychkov, on the border with Romania, is in one of Ukraine's most underdeveloped regions. CC TijsBViewing the events in Ukraine in terms of the political-economic networks of the ‘post-Soviet condition’ explains why Eastern separatism is being sustained by Russian military pressure, and has so far had difficulty mobilizing a sustained protest movement. Outside of occupied Crimea, whose economy is deeply tied to the Russian military and Russian tourism, we have not yet seen pro-Russian mobilisation on the scale that can establish political hegemony. The elites know that with Yanukovych out of office and on the run he is virtually useless to them as he cannot balance interests and produce favours. Is there really any point in their fighting for a rump Eastern Ukraine that might be easily cut off from the Western banking network, and the goods it can purchase? Nor is it worth their joining Russia where they will come under the sway of more powerful elites. Ideology and ethnic mobilisation falls by the wayside as political networks realign. We are now witnessing something similar to what historian Stephen Kotkin observed in the events of 1989: a political run on the bank. Furthermore, while nationalism is a powerful emotional force, Eastern Ukraine contains a significant population of people who are as fed up with the ‘post-Soviet condition’ as their West Ukrainian countrymen, and who see the Maidan movement as their own. 

Ideology and ethnic mobilisation falls by the wayside as political networks realign.

The conditions for liberal democracy

What lessons can be drawn from the above, for those who want to see a liberal democracy emerge not only in Ukraine but all across the post-Soviet world? Most immediately, the problems in Eastern Ukraine should be seen not so much as an ethnic conflict as a conflict between clans of rent seekers who have lost the stabilising factor of Yanukovych mediating between them. More importantly, Ukraine and the rest of the post-Soviet states need to become strong states. If the European Union, the United States or any other international actor really wants to build a liberal democratic society in Ukraine or the post-Soviet world as a whole, it needs to encourage the transfer of what should be the welfare and protective functions of the state away from rent-seeking oligarchs who have managed to hold entire governments hostage, into an independent state. This means doing something that European and North American policy-makers might consider anathema: weakening ownership rights. Instead of austerity, we need to encourage the formation of a functional and strong welfare state that can liberate citizens from networks of patronage linked to old Soviet industrial structures; and encourage the formation of independent unions that can represent the economic interests of workers, before the state. Only through these institutions can the ‘post-Soviet condition’ finally be relegated to history, and ‘liberal capitalism’ built. Until then, the peoples of Ukraine and many other post-Soviet countries will remain stuck in a post-Soviet state.

Standfirst image (c) Shutterstock/Ekaterina Bykova