What Went Wrong in Ukraine – And When Did It?

After the annexation of Crimea and due to the ongoing war with Russia, Ukraine has been branded as a villain seeking foreign assistance. With National Bank reserves of €5 billion and a public debt equal to 80.2 percent of GDP, Ukraine will have to repay €38 billion of EU loans in the next five years. As with humans, help from the outside usually brings bad results if there is no incentive to take responsibility over one’s future by reflecting on past mistakes. So what went wrong for Ukraine – and when did it? Let’s take a look at some crucial historical events.

When the Russian and Austro-Hungarian empires fell in 1917 and 1918 respectively, Ukraine, which had been parted between them for more than one hundred years, entered a short-lasting era of anarchy. Because of the fact that there were too many people and unions, who wanted to obtain the power over the territory, and each had a different agenda, none of them succeeded. As a result, the Russians took the opportunity and occupied Eastern and Central Ukraine, while other parts got divided between Poland, Hungary and Romania. Since the Soviets had managed to monopolize power over the bigger part of Ukraine, it can be said that at this time Ukraine’s path from anarchy to a centralized state begins.

Ukraine growthIn a short period of time, the USSR succeeded in establishing a very harsh tax system and an extensive bureaucracy over Ukrainian territory, otherwise known as Ukrainian Soviet Socialist Republic. The Constitution of 1918 and lots of other laws and regulations aiming to reach the communist ideal had been passed. The next step made towards centralization of power was the development of infrastructure followed by the establishment of huge public enterprises.

When in 1939 the Second World War broke out, the Soviets occupied Poland and as a result western Ukraine “got reunited” with the rest of Ukraine under the Soviet rule. Step by step, the system created in Soviet Ukraine got fully replicated in western Ukraine, though there it had faced an enormous resistance. Due to the cultural, religious and/or political influences of the Austro-Hungarian Empire and Poland, western Ukraine was reluctant to give up its heritage and dissolve itself in the Soviet Ukrainian identity. The opposition movement was led by the Organization of Ukrainian Nationalists, who were fighting both against the Soviets and Nazis. If we take as a premise Ukrainian territory as it is today and Ukrainians as people inhabiting it, then this fight between the western Ukrainian resistance movement and the Soviet Ukraine which lasted around 30 years was nothing less than the biggest civil war in Ukrainian history – and it has dramatically affected the present.

For the state to become inclusive, it should overcome a power-sharing process as the last step. Even though the Soviet leaders had difficulties with it, they established three branches of government and a great number of organs, like the KGB within them. As with absolute monarchies, it was done mostly to satisfy the elite and keep them at hand, meaning that the power got rather dispersed yet it still belonged to a single person. History provides many examples of what happens to countries that fail to make this final move of establishing an efficient system of checks and balances. Sooner or later the elites would start plotting against each other and their leader, the pressure would become unbearably strong and consequently a country would turn into chaos and disappear from the world map like the USSR did.

In 1991, when the USSR burst into pieces, Ukraine, as its successor, inherited not only a territory with two absolutely different eastern and western Ukrainian identities, but also the legal and tax system. Unlike Baltic countries which had decided to start all from scratch, meaning from anarchy to a centralized state and then to an inclusive one, Ukraine chose an easier way of going on with the Soviet heritage. Yet the most striking thing here is not the fact that Ukraine lacked intellectuals at that time to make it successful, but that former Soviet puppets monopolized power. Instead of writing something completely new and free, Ukraine just started a new chapter of the same book.

If cancer is identified in the early stages, it’s still curable yet ignorance usually has lethal results. Same can be said about the misalignment between power and identity in Ukraine, which stems from the historical, cultural and even political differences between the East and the West. Back in 1991 while choosing a vector of development, Ukrainian officials could have chosen between one out of two options: to decentralize power to identity levels or to make a unity by building a new single Ukrainian narrative. Yet by having turned a blind eye on the problem back then, they made it even worse and it resulted in deaths during the Maidan Revolution of 2014 preceded by peaceful demonstrations which started four years ago in November.

Countries don’t become free and prosperous in a day and the past is meant to be reflected on. Regardless of two massive revolutions, Ukraine is still struggling to become a truly inclusive and free country. The economy remains very fragile with its 37.6 percent of overall tax burden and bureaucracy is as extensive as it used to be half a century ago. The number of state-owned enterprises hasn’t outstandingly decreased and the proportion of companies owned by oligarchs is still the same in post-Soviet Ukraine. Decriminalization of drug consumption and distribution as well as gun ownership is not even on the agenda. Moreover, the politicians still fight the opposition and reward those who serve them well. Sounds familiar, doesn’t it?

Mariia Chaplia is a law graduate and Communications and Development Associate intern at Students for Liberty.


The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

Do you like the article?

We are glad you do! Please consider donating if you want to read more articles like this one.


Share this article!
Join our community and stay updated!