At one time, the main reason for the collapse of the USSR economy was that it was an economic autarchy, i.e. a closed economy. In addition to space and military technologies, the USSR did not create anything competitive on world markets. There is an anecdotal case when the USSR Secretary General Leonid Brezhnev ordered a hairdryer from the GDR, because it was impossible to use the hairdryers produced in the USSR. To understand the reasons for the collapse of the Soviet Union and Ukrainian SSR, and this is important for the future development of Ukraine, you need to understand what was done wrong in the republic. Because today we must first of all think about how to compete with countries in the world in goods and services, and not only in raw materials. "The modern world is constituted by technology," wrote the German sociologist Ulrich Beck in 2001 in the book "Power and its opponents in the era of globalism" countries will cease to exist as economic units that are reckoned with in the world.
Ukraine is a former Ukrainian SSR (part, a fragment of the former Soviet Union), and in order to understand where to move on, we need to understand our ontology. And, having understood ourselves, our history, we will be able to choose the right direction of development in the future.
In 1991, food was bad in the Ukrainian SSR, and although we were not in the first places in technology (in the defense industry, and in space, we were in the first places), we occupied quite a worthy place in the world. Today we are careless, few Ukrainian politicians sound the alarm that we are starting to lag critically not only from the technologically advanced countries of the world, but also from our neighbors. As a rule, we are always interested in something else, albeit important, but not critically important, in the same way as national technological development is important today.
The views of the Washington Consensus prevail in Ukrainian economic analytics: liberalization, deregulation, privatization. All other points of view that differ from Washington Consensus are not so influential, although they are.
For the effective development of the country, Washington Consensus, unequivocally, sees the advantages of private ownership of the means of production over the state, in the absence of government interference in the activities of private firms. However, how then can one explain the global success of state-owned Chinese industrial companies? Why, to prove the thesis about the inefficiency of state property, we cite only examples of the relative inefficiency of production state-owned companies of the times of the Ukrainian SSR? After all, there are successful examples of Chinese state-owned companies from the same time?
Now we already know that the Soviet economy (except for the military and space industries) was not as efficient as compared to the economies of the West, not because industrial enterprises were state-owned, but because they were not pushed by the Soviet government to competitive exports, as the German economist Friedrich List intended to do back in the 19th century, and today the famous Indian economist Raguram Rajan. And as it is today on a much larger scale, China is doing. (And even earlier, all the famous developed countries of the world, from Britain to Japan, certainly did).
We have already written about the return of sociology to economics. So, following the economist David Landes, we repeat: “Culture matters!”. Those. we want to say that the success of economic reforms depends on understanding what the economic culture of a society is and what is the tradition it is based on.
When we are cited as an example of the success of Western economies, and, accordingly, they offer us to take them as an example of imitation, and they say that success there was achieved primarily due to the fact that the economies were predominantly private in nature for the means of production and there was no state regulation, then this is only partly true. Yes, in Western countries the private sector dominates in production (but this is not total there either, in Renault, for example, 15% of the company's capital belongs to the French government), but the state regulation of economic processes was present there, it exists and is likely to continue. For example, we have already mentioned the largest institute for technological development in the United States, created in 1958 by the state agency DARPA, which is still working successfully. Industrial protectionism, which the United States had used with short interruptions, at least since the mid-19th century, was abandoned only after 1945. And today they will most likely return to him. Technocrat billionaire Eric Schmidt speaks of the need for such a return .
Second, the majority of Americans are religiously Protestants. And these denominations of Christianity are characterized by a focus on work ethics. German sociologist Max Weber wrote about this at the beginning of the 20th century in his work "Protestant Ethics and the Spirit of Capitalism." Despite this fact, cited by Weber, the British and Americans have never forgotten about the effectiveness of industrial policy, although in Weber's opinion they are most suitable for pure capitalism laissez faire (free capitalism) without any state regulation, as almost ideal actors of behavior based on mercantile motives).
In China, on the contrary, success in industrial development was achieved with the understanding that the Chinese (Han) historically formed not as Protestants, but as Confucians, and for the development of China, therefore, a proactive organization of economic processes by the government is necessary. Back in 1954, American sociologist and economist Barington Moore, realizing the importance of the proactive role of the Communist Party of the Soviet Union (CPSU) in the economy, wrote that he did not understand who would replace the CPSU as a “collective entrepreneur” if, for some reason, the CPSU suddenly abandoned economic management. So he understood that it was the CPSU that was then the main actor of change. In his recent book "The Price of Civilization" (2011), the chief adviser to the Ukrainian and Russian reformers of the time, the famous American economist Jeffrey Sachs, admitted that they were then seriously mistaken in their recommendations for conducting neoliberal policies. In Russia and Ukraine, it did not work, Sachs writes, and in this book he suddenly recalls the industrial policy measures that would then be desirable (the negative results of the application of economic models also move economic science, but then Western economists trained in our countries). Barington Moore understood this in 1954, and Jeffrey Sachs understands it today. It turns out that it is easy to make recommendations that laissez faire (free capitalism in the style of Washington Consensus) will solve all economic problems, while it is another thing to actually achieve this.
Ukrainians are also not Protestants, their Orthodox ethics in labor practice is even closer to Confucian behavior in terms of models of behavior than to Western Protestantism, which defined the ethics of behavior of the economic man (“economy man”), which is the main driver of laissez faire capitalism. That is why the mechanisms of spontaneous generation of capitalism laissez faire in our country do not work for all 30 years of independence, with the complete dominance of Washington Consensus practice in our country. The laissez faire ideology is, of course, very outwardly attractive - it flatters the population of the country: “Well done, it's all about a bad state that constantly spreads rot on you. As soon as they cease to control you and force you to do something, the hidden huge potential will immediately open in you, and you will strive for development, which the world has not seen! ". However, in reality, this is not at all what is happening, but what the economist William Baumol described in his book The Microtheory of Innovative Entrepreneurship:
“... redistributive activity opens the shortest path to personal enrichment. If the redistributor does not have a single cow, and his physically weak neighbor has six, the seeker of wealth takes a club, stuns the neighbor and takes four cows (or all six) out of the yard.
By contrast, the productive approach to wealth accumulation requires the use of knowledge and does not always lead to success. Suppose you have set out to develop a more productive variety of barley to improve the diet of your cow herd. You will have to put in a lot of effort, but the end result is highly uncertain. Even if you achieve your goal, other people may be the most likely to benefit from higher yields.
In the absence of the special incentive arrangements or safeguards to benefit those , who devoted themselves to the accumulation of productive, any rational seeker of wealth is likely to choose a redistributive way. "
And incentives and agreements are industrial policy. In the absence of these incentives and agreements, according to Baumol, economic relations will always have, in the main, the nature of robbery and corruption.
In the modern world, where "realpolitik" dominates and in which we see how, for example, Germany, on the one hand, supports Ukraine in the conflict with the Russian Federation, and on the other hand does not forget about its mercantile interests (albeit at the expense of Ukraine) by supporting the transportation of gas bypassing Ukraine via the Nord Stream-2 gas pipeline, there are always development strategies for “insiders” and for “outsiders”. Nobel laureates in economics, Americans George Akerlof and Robert Schiller, in their book "Hunt for a Simpleton" (2015) write that the modern world is full of "phishers" ("hunters for simpletons"), and "phishing" ("hunting") - it is "the ability to get people to do what is in the interests of the phisher and what is not in their own interests." A "simpleton" is a person who, for some reason, swallows the bait. "
This is such a bait or "strategy for strangers" is the Washington Consensus. When the Washington Consensus is offered for the development, then obviously we do not belong to this inner circle of “our” countries, whose elites know that it is impossible to achieve any development through the Washington Consensus. This strategy is generally not clear. Its rules and guidelines, even in the countries of the modern developed world, have never been totally applied (they were sometimes applied, not for a long time and not for everyone, more about this in the book by Ha-Jun Chang "The Evil Samaritans"), and especially during the periods when these countries were developing , despite the fact that many of these countries were Protestant by religion of the population. And in the theory of the neoclassical school of economics, on which the Washington Consensus is based, the spontaneous generation of effective economic relations in them could have occurred. But even they did not dare to try such recipes. How then can we develop according to these patterns, as a developing country?
American expert Richard Rumelt, one of the world's most prominent specialists in strategic management, writes that the main reason for the failure of any reforms is that reformers do not know how to correctly diagnose their economy. (Note how this is similar to medicine, in which the correct diagnosis, and the development on the basis of such a diagnosis, treatment, and is the main reason for the patient's recovery). And if the reformer has not correctly diagnosed the current socio-economic status of the country (the two parts of this concept "social" and "economic" are equally important), then it is impossible to achieve success in the implementation of the reform strategy (I think it is not necessary to say that without such a strategy catching up development is completely impossible, in principle).
So, in order to make a diagnosis, first of all, honesty is needed. And honesty is the fact that everything that was created in the industrial development in the Ukrainian SSR, at the cost of huge sacrifices and suffering, was achieved with proactive, top-down directional activities. And with the disappearance of this guiding force in the 1991, development stopped. The Washington Consensus that we adopted then was not suitable for our development, because we are not Protestants. Just as the Chinese were not Protestants. And therefore they, too, at one time, did not accept the postulates of the Washington Consensus, which was also recommended to them. And they accepted the theory of industrial policy by Alexander Hamilton-Friedrich List. If it had not been for the Chinese Revolution of 1949, there would have been no capitalist self-development in the Chinese Qing Empire (1644-1912). Despite the fact that at the same time Germany, and, especially importantly, Japan (also, like China, an Asian country), in the late 19th and early 20th centuries developed rapidly through industrial policy measures.
The Washington Consensus recipes have not worked for us in the past, they will not work in the present and in the future. Today we need to turn our heads to the East, to China, and learn from the experience of reforms there, especially since there is no specific experience of Chinese reforms. Chinese economic reforms are based on the actualization of reforms in the style of Alexander Hamilton-Friedrich List, which, of course, are enriched with practical experience in the implementation (after all, the world, at different times, is always different) of these reforms in China. There would be no successful technology companies in China, such as Alibaba or Tencent, if the Chinese Communist Party (hereinafter CCP), at the end of the 70s of the last century, had not decided to create conditions in China for the existence of a private the technological sector within the framework of the industrial policy that was new for that time. And no financial system was created to support these companies, along with public sector companies.
What are our strengths and weaknesses in Ukraine today? We are still not Protestants, and therefore we will not start as we want, or rather, as the Washington Consensus claims, spontaneous market processes in the economy, as in the West (they also never spontaneously started there, but they were always launched (see how Fred Terman created Silicon Valley .) We cannot compete in export markets in the technology sector without the targeted support of this type of activity of private and public companies from the government. If we ignore these settings the result will be the same as before (you can’t apply the same strategy, and expect a different result, at the same time).
Richard Rumelt writes that once we have correctly diagnosed our socioeconomic status, we need to develop the right industrial policy principles. And then proceed to detailed plans for its implementation.
We are starting to get better with this: recently, by the order of the President of Ukraine, a Working Group on the innovative development of Ukraine was created. Let's hope that soon this group will develop a correct development document, which will not consist only of empty declarations, but will be a strategy document, taking into account the principles for developing such documents described in Rumelt's book Good Strategy, Bad Strategy (2011). And it is strongly desired that when creating a new innovative strategy of Ukraine, in particular, the experience of the PRC in carrying out industrial reforms will be carefully worked out in order to update it for our Ukrainian specifics, with a detailed plan of specific government actions to implement this strategy.
This strategy will, in fact, be the first step in our departure from the postulates of the Washington Consensus, the use of which has brought us so much trouble. Why? Because the Washington Consensus is not a strategy - it is a one-time creation of conditions for ensuring self-generated processes in the economy, as it should be in the theory of the neoclassical school of economics. According to the Washington Consensus the state once creates conditions for development, and then leaves, and deals only with defense and foreign policy, as well as maintaining internal public order. As we have shown, this does not happen, and it did not happen anywhere in developed countries (exception: perhaps Hong Kong is a very small enclave and market that took advantage of all the unique advantages of being at the "economic gate" of huge China when it was a British protectorate).
When diagnosing our economy, according to Rumelt, we must take into account that the Ukrainian SSR existed for 72 years, i.e. more than 2 times more than independent Ukraine and its influence still affects our consumer behavior, work ethics, attitude towards entrepreneurship. The initial task in the Ukrainian SSR was the creation of a modern industry and mechanical engineering (factor growth) of the 2nd industrial revolution for that time, and the Ukrainian SSR then coped with this task. But when we had to switch to competition in industrial exports, to improve the quality of products, approximately in the 60s of the last century, which would be logical (this was done by the "tigers" at the same stage of economic development: South Korea, Singapore, China), we made a strategic mistake - this was not done. We did not go over to such a development, and in the early 90s of the last century. This is the second mistake in a row.
Today the world is running through the 4th industrial revolution, and we should not make a third mistake in a row. Every technological revolution begins with the development of the factors of production determined by that revolution. And if a country lagged behind in development in the past technological wave, then it is always possible to catch up with developed countries in a new wave of technologies. Ukraine can (and should) fit into the developed world within the framework of the 4th industrial revolution, just as South Korea (a country comparable in numbers of population with Ukraine) entered the industrial world of the 2nd technological revolution at the cost of extra efforts. And here today China can extremely help us to solve this problem. Firstly, it recently passed, by historical standards, the road of technological development that Ukraine will have to go through. Secondly, it is interested in partners in a new stage of its technological development - the strategies "Made in China 2025" and "One Belt One Road".
At the end of the first half of 2021, China retained the status of Ukraine's largest trading partner. Bilateral trade reached 8.85 billion US dollars, which is 14.6% of the total volume of Ukrainian foreign trade. According to the State Statistics Service of Ukraine, in January-June of this year, the export of Ukrainian goods to China increased by 43% against the same period last year and amounted to 4.28 billion US dollars. At the same time, Ukraine has increased imports from the PRC by 25% - up to 4.57 billion US dollars. The positive dynamics of the Ukrainian-Chinese trade turnover recorded in the first half of 2021 corresponds to the general trends of Ukraine's foreign trade for this period. Thus, in January-June, Ukrainian exports grew by 30.7% and reached $ 29.92 billion, while imports increased by 28% to $ 31.25 billion.
According to the Ambassador of the People's Republic of China to Ukraine Fan Xianrong, said at a press conference dedicated to the anniversary of the strategic partnership between China and Ukraine, there is great potential for the development of mutual trade, in particular, in the agricultural sector. As an example, Fan Xianrong said that Ukraine ranks first among the importers of corn, sunflower oil and sunflower meal to China . At the same time, the diplomat noted that last year China purchased over 100 million tons of soybeans on world markets, of which 50-60 thousand tons are in Ukraine. The ambassador also said that China imports a lot of barley, beef and peas. “We are ready to buy more products from Ukraine. The Chinese market is open for Ukraine, Fan Xianrong said.
In addition, Fan Xianrong also said that Chinese large companies are ready to work in the Ukrainian market: “There are all the prerequisites for even more successful development of Chinese-Ukrainian relations. I am optimistic about the prospects for our cooperation with Ukraine. For this, the Chinese side is ready to continue making efforts together with the Ukrainian side. "
At the same time, it is necessary to understand the impressive scale and technological equipment of Chinese companies. For example, today the market capitalization of Tencent Holdings Limited, one of the largest investment and venture capital companies in the world, is 570 billion US dollars (!!!). And the new 18 MW MingYang Smart Energy turbine will be larger than General Electric's Halide-X , which until recently was considered the most powerful in the world. ME 16.0–242 developers promise that the 242-meter structure will provide electricity to 20 thousand coastal houses and will last at least 25 yearsю
Chinese telecommunications operators have successfully connected more than a third of the country's population to 5G networks. According to The Register, the 5G user base of China Telecom, China Unicom and China Mobile has reached 500 million people, and the number of 5G base stations in the country already exceeds 1.4 million. Thus, the IT giants have significantly exceeded the forecasts of the Chinese authorities - the government expected to connect 500 million users to 5G by 2023 alone
Chinese rail operator CRRC promises to provide its customers with the fastest ground transportation services in the world. The company's engineers have developed a new magnetic levitation train capable of accelerating to 600 km / h - this is just 3 km/h slower than the experimental record holder from the Japanese JR Central.
Chinese scientists have developed the most powerful quantum computer in the world and named it "Jiuzhang". The new quantum computer can implement large-scale GBS 100 trillion times faster than the world's fastest supercomputer.
And there are dozens, if not hundreds, of such examples of the technological excellence of Chinese companies and their financial strength.
China's GDP growth rates are still high, in the first half of this year they amounted to 12.7%.
China's foreign trade turnover in the first half of 2021 reached the best level in history. The total value of China's imports and exports of goods in the first half of this year reached 18.07 trillion yuan (about 2.79 trillion US dollars), an increase of 27.1% in annual terms. In particular, exports amounted to 9.85 trillion yuan (about 1.52 billion US dollars), an increase of 28.1%; imports - 8.22 trillion yuan (about 1.27 billion US dollars), an increase of 25.9%. Compared to the same period in 2019, the total volume of foreign trade, exports and imports separately increased by 22.8%, 23.8% and 21.7%, respectively.
Today, Ukraine and China signed an intergovernmental agreement providing for the expansion of cooperation between the two countries and assistance in the implementation of joint projects in the field of infrastructure construction: railway transit, airports, ports, communications and municipal engineering construction. The agreement also provides for the attraction of funds on preferential terms from the PRC government, necessary for the implementation of infrastructure projects.
In any technological development, an important factor for success is not only having a good idea, but also having financial institutions that will finance this idea. China can become such an institution for us if we share its philosophy of technological development.
We, as an independent country, must take into account the trends of world development, and at the same time be very distrustful of the recipes for development in the world from various “phishers” with whom we are literally surrounded. We cannot follow someone else's instructions thoughtlessly. Today we must constantly proclaim that Ukraine has no permanent enemies and permanent friends, but only interests. Our real interests consist in nothing more than strengthening the defense capability of our country (before earning money, you must simply survive), which is impossible without the modern industry of the 4th industrial revolution. This is an axiom. Without a developed national industry, there is no effective defense of the country, no modern agriculture. The production opportunity curve assumes that at a given level of productive forces, with a full load of the economy, we can create each extra unit of weapons only when the population's food consumption decreases ("guns instead of butter"), and we should therefore seriously revise the standards of our consumption behavior if we want to be an independent country. The United States, China, the Russian Federation and other countries that spend significant funds on defense are not so stupid at the same time (after all, they could eat and consume everything, but if not, they spend on defense). After 1991, Ukraine, having thrown off the military burden of the times of the Ukrainian SSR, finally fed its population. However, in 2014, if it were not for the support of the world community (next time such support may not be there, as it was not, say in 1938 for Czechoslovakia), it could have lost its independence in the conflict with the Russian Federation (“if you don’t want to feed your army you will have to feed someone else's ”). Therefore, in our economy, we must maintain a reasonable balance between consumption and the creation of artifacts of the new 4th industrial revolution.
And we must cooperate with all the countries of the West, and with all the countries of the East ("you cannot put eggs in one basket"), which can be useful to us. If someone treats us like a satellite, it should be an insult to us. Never before has a country achieved results if its elites were aware of their inferiority. Only a country with dignity can find its place in the world. The ideology of the Chinese strategy "One Belt and One Road" is mutual respect for partners. To check this, you just need to try and take part in this project.
China recognized the independence of Ukraine on December 27, 1991, and diplomatic relations were established on January 4, 1992, an agreement on friendship and cooperation with the PRC was signed on May 15, 2014. In our opinion, it is necessary to significantly deepen this cooperation, because most likely in the medium term, given the rate of technological growth and the size of the country's population, China will become the first economy in the world. And it would be just stupidity on our part not to bet on the development of economic and political relations with such a powerful "world-economy" (Fernand Braudel). And China, in its turn, is certainly interested in cooperation with such a promising partner as Ukraine, which in the face of the current government has the will to change, which we have not had for a long time.