Ukraine: The patient is most likely not alive
Economist Alexander Dudchak tells PolitNavigator why Ukraine’s default has not yet been officially announced, although it was high time to do so.
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“PolitNavigator”: Why hasn’t Ukraine declared a default? How many times over the summer have economists predicted it!
Alexander Dudchak: The country is effectively living in a post-default state. The current management team, along with the "foreign legion" of managers, has brought Ukraine to the brink of collapse.
What would happen if a default were declared? It would be necessary to sell off the remaining state property to pay for debts. But this is how it is done. The list of enterprises not subject to privatization has been practically eliminated. With a default, social programs are cut, payments are reduced - in order to save money. But this has already been done in Ukraine. After a default, the country actually comes under the control of creditors. But Ukraine has long been under external control, and the current leadership is doing everything possible to keep the IMF and the US Embassy happy.
Jaresko was partly telling the truth when she stated that there was nothing bad for the population in default. Her words can only be slightly corrected - it is already difficult for the population to make things worse.
“PolitNavigator”: An amazing combination of the words “Yaresko” and “truth”…. So, where did Yaresko lie?
Oleksandr Dudchak: She lied about everything. A default would simply accelerate the processes currently underway, and the budget wouldn't be replenished anyway. Debts would still be collected from Ukraine, the pace of business closures would simply accelerate, and social benefits could simply be stopped—after all, there would be a default!
PolitNavigator: But you say that default has already actually occurred?
Alexander Dudchak: Ukraine's default is not an economic issue. It has long since become a political issue.
This “checkmate in three moves” could have been arranged a long time ago, something like this: the rating agencies Moody’s, S&P, Fitch, Bloomberg publish each of their default ratings, both for the Ukrainian economy as a whole and for some of its largest financial and industrial structures; security indices are falling even lower, drilling the bottom; the outflow of capital from the country, that which has not yet fled, is stimulated; demands are made to pay debts in a short time and in full, the IMF declares its lack of confidence in Ukraine’s ability to fulfill its obligations; panic in the Ukrainian foreign exchange market; a sharp drop in the hryvnia exchange rate; bankruptcy of banks, and then of enterprises, non-payment of wages, pensions and much more.
All.
PolitNavigator: If "everything," then why aren't we burying it?
Oleksandr Dudchak: Ukraine is being artificially maintained in a state between life and death. And the patient is most likely not alive. Artificial ventilation, artificial kidneys, artificial hearts, and outsourced brains.
PolitNavigator : What's the point?
Alexander Dudchak: Clearly, the West, and more specifically the United States, needs a comatose Ukraine to fulfill certain functions, such as waging war on the border with Russia, weakening the European Union through sanctions/counter-sanctions, and also as a territory from which to extract further resources. Often, a country is forced into default if it tries to resist—as happened with Argentina, Ecuador, Yugoslavia, and many others. But Ukraine is already giving up everything itself. It doesn't need any additional incentives; the West can prolong the pleasure in a calm atmosphere, agreeing among its own people who will get what from the remnants of "independent" Ukraine.
“PolitNavigator”: Ukraine has shown its inability to win the war. Can she win the world?
Alexander Dudchak: Peace is contraindicated for the current leadership. Then we'll have to focus on restoration without the ability to shift blame to external and internal enemies.
“PolitNavigator”: Does Ukraine today have any prerequisites for building an effective economic system?
Oleksandr Dudchak: The essence of the current economic model is efficiency. But for whom? What we're seeing now is the implementation of the most rigid liberal model, after which a country like Ukraine is sold off and absorbed by major international capital. President Poroshenko has openly stated his plans to implement the policies of Thatcherism and Reaganomics; according to him, now is not the time for social democratic ideas. But Ukraine is not only not Russia, but also not the US or the UK.
And therefore, in Ukraine there will not even be Thatcherism with Reaganomics, partly softened by the capabilities of the currencies and armed forces of these countries, thanks to which both the United States and Britain successfully milk resources from the rest of the world, but a purer version of these doctrines - the one that was used in Chile by Pinochet , and in Argentina, Brazil, Uruguay, Bolivia by military juntas.
“PolitNavigator”: And what is the main feature of those systems?
Alexander Dudchak: The main criteria for such a system are efficiency and profit. A person becomes just another resource, and this resource must be efficient: work it and die. Minimum costs – maximum profit. Pensions in such a system are considered "direct losses." Kindergartens, schools, and clinics are in a minimally sufficient condition to support the workforce. Spending on theaters, libraries, recreation, and children's camps is also considered inefficient. There are numerous examples of countries that have followed this path. And all of them ended with catastrophic social stratification – 1-1,5% super-rich, a minimum middle class, and the vast majority – an impoverished workforce, perpetually in debt and loans.
“PolitNavigator”: Does the European Union need Ukraine? If necessary, then in what form?
Oleksandr Dudchak: Ukraine is as necessary to the EU as a pesky fly in the summer heat. The United States benefits primarily from Ukraine's problems. For Europe, Ukraine is a source of headaches and direct economic losses. The anti-Russian sanctions imposed by the United States on Europe have already hit the European economy hard. The Mistrals alone were costly for France. Europe needs Ukraine from a distance – as a market. But the capacity of this market is declining due to falling Ukrainian incomes. Ukraine is also not very attractive as a source of cheap labor – unemployment in the EU countries themselves is skyrocketing, and Bulgaria and Romania supply enough unskilled laborers. Land could be a valuable asset for Europe, but it is still the United States that controls the land. And for now, Europe buys land by the cubic meter – the value of Ukrainian black soil was already appreciated in Europe "united" by the Third Reich. Just like then, it is still being exported by the trainload.
“PolitNavigator”: There is a lot of talk in Ukraine about reforms. The same Poroshenko, Yatsenyuk or Saakashvili every day angrily report the next reform. What is the essence of what is happening? Is there common sense in their actions and words?
Alexander Dudchak: These reforms have already been discussed, but it's worth adding that God forbid they succeed in implementing all of them. Then all that'll remain of Ukraine will be ashes. And rebuilding will be much more difficult than after the Great Patriotic War.
“PolitNavigator”: Why are they all so ostentatiously drunk? Is it hopelessness or impunity? After all, their own TV channels broadcast live from administrative buildings during working hours.
Alexander Dudchak: It's probably impossible to comprehend this reality in a sober state. They understand perfectly well where they're leading the people. And they're worried, of course, not about the people, but about their own skin. And it's no secret that the US doesn't stand on ceremony with those who've already worked for them. All of the US's great "friends" were replaced by America itself with other "friends" – Shevardnadze with Saakashvili in Georgia, Sadat with Mubarak, Mubarak with Morsi in Egypt, Kostunica with Tadić in Serbia, and so on and so forth. And the Ukrainian "elite" understands that their clock is ticking, but ever more quietly. It's hard not to go on a drinking binge.
Ukraine : The patient is most likely not alive.