Eurasian Integration as a Chance for Survival in the Global Economic Crisis
Natalia Vitrenko
Doctor of Economics, leader of the Progressive Socialist Party of Ukraine and the Eurasian People’s Union of Ukraine
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The destruction of the foundations of the world economy inevitably produces a crisis, with chaos and instability, wars, epidemics, catastrophes, mass deaths, and the liquidation of national economies and national sovereignty. The annihilation of national economies is an inevitable part of the process of globalization, whose aim is to establish a new global world order. The mechanisms of globalization are the IMF, the WTO, the World Bank, and the EBRD [European Bank for Reconstruction and Development].
Ukraine Submits to Globalization
A dramatic example is Ukraine. I’m going to show you this catastrophe in figures: everything that has happened in the past 20 years.
Six months after the proclamation of independence, Ukraine, on June 3, 1992, joined the IMF, and began to borrow, accepting the conditionalities. In 1995, Lyndon LaRouche came to Ukraine on our invitation, as did Helga Zepp-LaRouche and other representatives of the Schiller Institute. LaRouche met with Speaker of the Ukrainian Parliament Oleksandr Moroz; he met with members of the Parliament from the Socialist Party; he met with scientists, economists. And he told them what should be done and what should be avoided, as well as what reforms were needed to bring about a recovery and renaissance of the economy.
LaRouche exudes love for humanity, but the IMF came in with dollars and bought off politicians, officials, and members of Parliament. And therefore, instead of listening to LaRouche, Ukraine started doing everything the IMF said to do: deregulation, privatization, and macroeconomic stabilization. What did deregulation mean? It meant a floating currency exchange rate, while all the state-owned and commercial banks were cut loose to fend for themselves.
Then came privatization, in which essentially, the whole economy was put on the auction block for peanuts: the collective farms, industry, and so forth. In macroeconomic terms, Ukraine shifted to a cheap-labor model, with the reduction of social benefits and elimination of subsidies for housing and utilities.
In 2008, Ukraine joined the WTO and the results were similar, starting with the destruction of physical production in Ukraine.
We can see in
Figure 1, how GDP and physical output in basic areas of industry fell during the two decades from 1991 to 2012. Look at the second column, which is electricity production: It dropped by 35%. Production of rolled steel fell by more than half. In 2012, tractor production was only 5% of what it had it had been in 1990. And this is in a country that has 20% of the world’s black-earth soils, and one-third of the population lives in rural areas. The machine-tool industry practically ceased to exist. Whereas Ukraine used to have 16 major machine-tool plants, which produced 37,000 machine tools in 1990, now there are only three left, which are barely on their feet; they produce just 40 machine tools a year.
Out of 50,000 companies privatized, 49% ceased to exist. They shut down. As for 1990, machine-building had been the core of the Ukrainian economy, with 360 factories organized in 20 specialized industrial sectors. Ukraine had an advanced military-industrial sector, machine-building for heavy industry and the power industry, rocket-building, an aircraft industry, shipbuilding, and auto, locomotive, tractor, and machine-tool industries. Machine-building accounted for 31% of GDP, making Ukraine one of the top ten countries in the world.
Ukraine accounted for 2% of world GDP, and we were 11% higher than the world average for per-capita GDP. By 2012, Ukraine was producing only 0.2% of world GDP. Per capita, we are 40% below the world average; we’re lower than Namibia.
Destruction of Science
The basis for growth in the Ukrainian economy is science. We were always proud of Soviet science, and Ukrainian science in particular. We were seventh in the world in the power of our scientific complex, but what we see in
Figure 2 is the destruction of Ukrainian science. This is what happened to Ukrainian science over the last 20 years:
Formerly, we had 500,000 people working in science. The most talented of them left the country—10,000 people. Hundreds of thousands of scientists were thrown out on the street to engage in primitive forms of retail trade, selling items at flea markets, working their kitchen gardens, or they retired. Hundreds of thousands of young people who should have become scientists, did not. You can see the reduction by 50% of the people working in the National Academy of Sciences system. The second bar is the total number of scientists. It’s just over a third of what it was. The number of people employed in innovative industries is at about 30% of the previous level. Research in the technological sciences is 28% of what it was. And the number of industry-related research institutes is only 9.5% of what it was previously. The assimilation and implementation of new technologies is occurring at only 7.6% of the 1990 rate.
We should note that this kind of destruction of science means that the portion of companies engaging in innovative research is only 28% of what it was. The portion of GDP growth attributable to new technologies is only 0.7% in Ukraine, as against 60-90% in advanced countries.
This is a scandal, a shame, for Ukraine!
During the years of its “independence,” Ukraine has lost 12 million jobs. The ILO [International Labor Organization] says that our unemployment is around 10%, but this doesn’t show the whole picture. This is just the tip of the iceberg; it’s actually much higher.
What Ukraine did obtain during these years is foreign debt. We now have a direct state foreign debt of $24.5 billion, or double the gold and currency reserves of the country, and our gross foreign debt is approaching 80% of GDP.
The worst thing is that this collapse of the economy has impoverished the population. The minimum wage in Ukraine is EU118 per month. The minimum pension is EU86 per month. But we don’t live in Africa. We have a fairly cold climate: You have to heat your house, you have to wear some clothes, and these are absolutely intolerable [wage] levels for Central Europe. These levels are only one-third of what is required for subsistence. The low levels set for the minimum wage lead directly to the deaths of the population, and the degradation of our natural resources. The share of wages in value-creation averages only 6.3% in Ukraine, as against 40% in the EU; 80% of the population lives below the poverty line.
We have increased drug addiction rates, increased alcohol consumption, super-exploitation of workers, psychological effects, crimes, and deterioration of the environment. These are the main factors in the reduced quality of life for the majority of the Ukrainian population. Our average life expectancy has dropped from 71 to 68.8 years, and is 15 years behind the averages for Europe. Men live to be only 62, and yet Ukraine followed IMF demands for pension reform, raising the pension age for women from 55 to 60, and for men, as high as 62 for some categories.
Deliberate Genocide
Figure 3 shows changes in the population. This is what Lyndon LaRouche was talking about, with regard to deliberate genocide.
In 1990, we had 52.1 million people in Ukraine. Now, nominally, we have 45.6 million as of 2012. But another 7 million left and are living abroad for economic reasons, so they’re not in Ukraine. They went to Russia to get work; they couldn’t get work in Ukraine. (This is why Ukraine today leads the world in juvenile drug addiction and alcoholism.)
So we had 52 million people. Nominally, we now have 45.6; in reality, we have 39 million people. During the Great Patriotic War, World War II, Ukraine lost 5.5 million people killed, and 2 million taken to forced labor in Germany. We lost 7.5 million people during the war. During these 20 years of reform, we have lost 6.5 million dead and 7 million departed, almost 14 million people, thus nearly twice the number of losses during the war.
The white segment (Figure 3) shows an extrapolation of what the population of Ukraine would have been, without this massive destruction. If we had continued the slow growth we had in 1970-90, with full employment and free education and free health care, our population would by now be 56.5 million, almost 57 million. Thus our country has lost one-third of its population! This is a crime. This indeed is the policy of genocide.
As a result, Ukraine, like other countries, has approached the dangerous boundary of a total collapse of the economy, a social explosion, permanent political coups, loss of sovereignty, chaos, and the threat of civil war.
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