Prior to 1991, Ukrainians had lived and worked within the USSR’s economic community. It was a system of fixed prices and fixed wages where state firms were mandated to achieve quotas of goods production. While shortages in consumer goods were a constant feature of imbalances in this system, the universal welfare state guaranteed a dignified minimum standard of living for the population. Employment and social rights were protected as a major state priority, including through good maternity leave, childcare, subsidised meals and nominal housing and public transport costs.
Although never an affluent country, Soviet Ukraine had noteworthy progress in the development of industries and technology, and had a highly educated population turning out world-leading scientists and engineers from its universities. Its post war growth was comparable to any county in western Europe which benefited from the US Marshall plan.
Industries were protected from foreign competition by the USSR’s closed economic system. Mines, stores and factories relied on government orders and transfer payments between state enterprises, so there was no real prospect of a company being forced to close due to a lack of orders for its products and services. A job therefore meant a job for life (or for however long you wished to remain working there) and plenty of other job positions were waiting to be filled – albeit on similar conditions of employment.
This apparently very stable arrangement ended almost overnight with the collapse of the USSR. The 1990s, to understate the matter dramatically, was a tough time to be a worker in Ukraine. Western economic advisers flew into Kiev to instruct the newly independent government on how they should create a ‘free market’ economy. Unfortunately for the former Soviet countries, the West had no intention of turning them into rival producers which would compete against European and US industries – they had something else in mind for Ukraine – so-called ‘shock therapy’.
So it was that the factories and stores closed, one after the other, through a brutal domino effect as the complicated web of state contracts and orders almost instantaneously evaporated. Companies were suddenly expected to compete on the world market, with which they had no prior contact, and for which almost no demand could have existed for their Soviet goods. The situation everywhere in the former USSR was catastrophic, but perhaps nowhere worse than in Ukraine. The demographic figures tell the story of a social disaster, where the system of healthcare and social services of all kinds collapsed under the implosion in State tax revenues.
The great legacy of Ukraine in the 1990s is today’s national population – standing at a level which is similar to that of the early 1960s, it is an almost unprecedented situation for an industrialised country. Such raw figures cannot of course illustrate the social trauma that was inflicted on Ukrainian workers. If it were possible to pull up the curtain and peak beneath these figures you would see emmigration, hunger, poverty, prostitution, violence of all kinds, drug and alcohol abuse and profound despair and helplessness.
After the initial collapse, Ukraine experienced a similar process as post-Soviet Russia – what Marxian economists call ‘primitive accumulation’ – that is to say, people using force to simply steal productive assets, and become the dominant economic class. This accumulation was at the level of an entire nation – the giant public industries and even the weapons belonging to the armed forces were appropriated by a new generation of entrepreneurs. The collapse in output led to hyperinflation and the wiping out of workers’ pensions and savings.
These things happened in all of the post-Soviet states, but there was something different about Ukraine. In Russia and elsewhere, a recovery began almost from the moment that the criminal gangs were ousted from economic power. The beginning of Putin’s presidency from the year 2000 signalled something very important – the taking of control by elements of Russia’s old state security apparatus. This was immeasurably preferable for the Russian economy and for workers than the preceding situation, where the power of criminal mafias made economic development impossible for the extremely weak Russian state at that time.
Population of Russia since the 1920s
In other words, Russia, along with most of the post-Soviet states, then began to recover. Their populations and living standards fell dramatically in the 1990s and early 2000s, and then stabilised or even began to grow again thereafter. There was no return to 1960s population levels as in Ukraine, or anything approaching such magnitudes of calamity. In Ukraine, the nightmare never ended. No counter-coup was ever launched to remove the criminal mafias from power in Kiev, and so the Ukrainian economy – along with the lives and hopes of its people, entered a death spiral in 1991, a death spiral from which it never emerged.
The Ukrainian economy
Adam Tooze is a favourite polemist of liberals in the Anglosphere, and for good reason. He is a talented writer with a close eye for detail, and everyone should read his contributions, whether you agree with his politics or not. Prior to the waves of outrage and escalation since the beginning of Russia’s Special Operation in Ukraine, Mr Tooze wrote a frank assessment of Russian and Ukrainian politics and economics since 1991. Interestingly he also candidly appraised the sequence of events, beginning with NATO’s Bucharest commitments, which led both Ukraine and Georgia inexorably down the road to armed conflict with Russia (see link beneath this article).
Tooze’s conclusion on economics is that it is “..clearly true that Ukraine’s elite have not come up with a formula for delivering the material basis of legitimacy, i.e. a minimum of stability and sustained economic growth. Economic frustration compounds the divisions between regions, language groups [and] factional interests. Since independence, the oligarchic super-rich have played a baneful and disruptive part in Ukraine’s politics”
Whereas Russia has its share of super-rich oligarchs (and accompanying negative consequences for its development), comparisons with Ukraine are facile. Russia’s strategic-level corporations such as Gazprom, Sperbank and Aeroflot are dominated by the state, as are communication mediums like news TV. Russia clearly looks to economic models like China and likes what it sees – a dynamic state sector with strategic interests throughout its productive and financial system. In Ukraine meanwhile every TV station is owned by a rival oligarch, the national airline, major industries, banks, and increasingly – productive land – are owned by domestic and foreign wealth funds – which retard growth by extracting as much wealth as possible, while investing as little as possible. Ukrainian agriculture, an industry where the nation both excels in production and which until recently had not been taken over wholesale by oligarchs, has in the past decade started to become monopolised in the hands of Ukrainian and foreign agro-holding corporations.
Control over the political system ensures that the oligarchy are protected from potential competitors in the industries that they have long-ago carved up between them in cartel arrangements. The situation becomes worse with each passing year, as vested interests prevent any kind of plausible industrial strategy.
The great tragedy of Ukraine therefore is that the death-spiral created by the mafia-oligarchs has not produced its antithesis, which would be either a socialist movement or a counter-coup by a strong national bourgeoisie. Socialism, as in many other post-Soviet states, is identified in Ukrainian politics less as an economic category and more through an association with Russia, and therefore in opposition to national independence.
The alternative political pole that would normally exist for socialists and communists in such an economic catastrophe is therefore filled by blood-and-soil nationalism, attracting the young, marginalised and angry, but without any cogent answers to the nation’s stark problems. Hence, every ‘Orange Revolution’ or ‘Maidan Revolution’ (and no doubt, there will be more in the future), simply serve to rearrange the cartel-division of the country between existing mafias. There are no significant political forces aiming to abolish the cartel system itself, because their stranglehold is so complete.
The Ukrainian working class
A prime example to consider in assessing the condition of Ukrainian workers is Ukraine’s new labour reform laws which Vitaliy Dudin, an expert on labour law and a representative of the Social Movement organisation described as “a rollback to the 19th century”. Ukrainian workers who had already lost so many rights in the preceding decades, can now look forward to a situation where “literally anything can be entered into an employee’s employment contract, without reference to Ukrainian labour laws. For example, additional grounds for dismissal, liability, or even a 100-hour week,” as George Sandul, a lawyer at Labor Initiatives public organisation put it.
If you allowed yourself to think that perhaps these are temporary emergency measures; simply war-time exceptions to the generally good trajectory of the prospects for Ukrainian workers, you would be mistaken. Bill No. 5371, as it is called, was registered with the Ukrainian parliament as far back as April 2021, and first proposed by the astroturfed NGO ‘the Office of Simple Solutions and Results’, funded by USAID and run by former Georgian president Saakashvili.
The bill’s authors argue that employment relations in Ukraine “are still regulated by the outdated Labour Code, adopted back in 1971 and developed under conditions of Soviet administrative command economy”. To give the authors their due, the terroristic banning of all labour protections is indeed a step away from the Soviet administrative command economy! US support for such measures are still informed by the same ideological formulae that led to the shock therapy in the 1990s – Ukraine must compete in the global marketplace, and because their industries are not wealthy enough to purchase the most modern equipment for complex production processes, they should compete by reducing the incomes of their workers to third-world levels.
Furthermore, the destruction of wages is not judged to be enough to allow for a globally competitive basis of labour costs. Whereas Soviet Ukraine had instituted a “solidarity pension system” whereby pensioners received payments from the wealth produced by the working population, last year Ukrainian prime minister Denys Shmyhal made it clear that if “decisive measures” are not taken, in 15 years time the Ukrainian state would cease to pay workers’ pensions altogether. Amid a long-collapsing population and economy, attempts to privatise the pension system led only to further disaster, meaning that the future for Ukrainian workers is now grim indeed. Approximately 80% of single pensioners in Ukraine live below the official poverty line and 65% of them are given less than 100 Euros (3000 Ukrainian Hryvnia) per month. The sad truth is that, on current projections, the great majority of Ukrainian workers today will never retire.
Ukraine’s place in the global economic order.
All of these elements of Ukraine’s long depression are unfortunately logical consequences of the West’s insisted-upon reform programmes after the Soviet collapse. There was only ever a small amount of room for additions to lower production activities in the Western value chains which were going to be open to the post-Soviet states. Countries like Poland, receiving German foreign direct investment, were able to produce some car parts, electronics and so on for German industry at lower labour costs. In this they were, and are, competitors with middle income nations like Turkey and China.
Capital expands according to its ability to convert the purchased commodity which is labour-power, into goods which can be sold profitably. Investment can only proceed on this basis. An important corollary to this statement is that new investment (putting new labour to work, generating new wealth and new profits) is limited by the existence of already installed, highly capital intensive, productive capacity. An overaccumulation of fixed capital means that new production cannot be undertaken with the expectation of profitable returns, and therefore will not be undertaken at all.
And so, this ‘middle income’ space in the unipolar economic system is now very crowded indeed, with dozens of countries seeking to break into it, and with growth rates of the EU and US economies consistently in long-term decline, it holds no real prospects for Ukrainian industry to reinvent itself. Taking market-share in a non-growing and highly competitive market is always a very difficult and cut-throat business, and Ukraine’s oligarchs have never, even at the high-point of globalisation in the 1990s and early 2000s, considered entering the fray in a serious manner. They have, of course, never felt the need to do so, because they operated private and protected monopolies and oligopolies within the state.
John Smith, in his masterpiece Imperialism in the 21st Century, explained how Brazilian Marxist Ruy Mauro Marini introduced what is likely to be an important concept for consideration of both Ukraine and Russia’s position in the international economic system today – that of ‘sub-imperialism’. He argued that dependent economies like Brazil’s are forced to compensate for the drain of their produced wealth to the imperialist centres by developing their own exploitative relationships with even more underdeveloped and peripheral neighbouring economies, such as Bolivia.
In the case of Russia and former Soviet countries like Ukraine, we can see this process playing itself out. While Russia has natural gas and oil to sell as a comparative advantage, and so feels less pressure to eviscerate Russian wages and pensions than does Ukraine, there is still a constant need to try to compete in global markets which have massive overaccumulation already built-in. Like many other countries this means getting stuck between, on the one hand, Dollarised high technology investment requiring the paying of monopoly-rent prices to a handful of very advanced western or Japanese firms for specialised equipment, and on the other hand, competing with low and middle income economies in a race to the bottom in labour costs.
Russia therefore feels compelled to, at the very least, prevent the weakening of its political position by stopping its closest trading partners from becoming geopolitical enemies and closing their investment markets to it. The West understands this, but doesn’t care. There is of course a further economic compulsion which Russia feels, to try to dominate those smaller economies in order to find new sources of profit and shore-up its own position in the global market. This is also true for all major economies, and particularly those in the middle income camp.
The real losers from this whole historical development since the Soviet collapse in 1991 are of course the Ukrainian working class. The tens of thousands of young people who are carrying rifles today and dying in the armies of the DNR and LNR, and for the Ukrainian state forces, could have instead lived lives of peace, work and dignity – watching their children grow and having confidence in their future. Before many of them were even born, their world had failed them, and their villages and cities had, through no fault of their own, been cast onto the scrap head of the global economy, with their life choices limited to poverty, emigration, and eventually, to war.
Ukraine labour law:
Ukraine pension crisis:
Adam Tooze on Ukraine
Statistics on Ukraine: