Monday, January 17, 2011

For Richer, for Poorer

I just discovered this UN project against poverty (, for more information). Below, November protest in Kyiv's Independence Square against new draft tax laws, which protect the richest and will hurt small businesses especially (flick photo by Stelih).

While Ukraine’s economy continues to tank, the rich are growing richer and the poor poorer. The gap is as bad as it gets here, where the 50 richest “robber barons,” to use a quaint late-19th century phrase, overpower the rest of the country’s 46 million people, about one-third of whom are economically destitute, with a combined networth of $67 billion or almost half of the nation’s gross domestic product (KyivPost, 26 November and 17 December). Good lord.

A recent State Statistics Committee says 16 million Ukrainians live below the poverty level, which in Ukraine is $115/month (or 907 HGR). Pensioners get $91-$100 per month at retirement. It’s impossible to live on these amounts. Impossible. In a recent experiment by the KyivPost five people tried living on the minimum wage for one month; only one lasted, barely. They could not do it. “It’s not even enough to buy food, let alone pay bills. Meat and medicine are luxuries." They suffered from constant hunger, weakened immune systems, illness, social isolation and, yes, anger. Rising anger. That’s when four called it quits.

In order to afford a healthy diet, just the basics, people need at least 2000 HGR a month, according to a Trade Union report (Kyivpost, 26 November). Current wages and pensions couldn’t be farther from that amount. How long can this go on?

At the other end of the spectrum are the 50 richest Ukrainians, a list led by industrial titan Rinat Akhmetov. He’s the richest of the rich. (“Rich man in a poor country,” Kyiv Post, 17 December 2010). Although they were affected by the global economic downturn, the richest Ukrainians held onto to their wealth, and their power. The richest list “is dominated by lawmakers or people with strong ties to government.”
“In elite cartel countries such as Ukraine, top political and business figures collude behind a fa├žade of political competition but in reality they colonize both the state apparatus and major sections of the economy,” a USAID report concluded in 2006. The KyivPost says this still holds true today. Almost half of the richest top 50, it notes, are either in government or they are elected officials, and 12 are members of Parliament, including Rinat Akhmetov. It’s not surprising that they are close friends with President Yanukovich, all in the same ruling Party of Regions.

It’s not a good thing obviously, especially since many of these fortunes came from acquiring Soviet assets rather than creating new wealth, according to the KyivPost. The vast wealth from metals, mining, transportation, and energy are examples. A few of the 50 richest Ukrainians are in the agri-business sector, which is growing. Maybe this is a good sign, but it doesn’t change the larger picture.

The way this oligarghy functions does more harm than good for Ukraine’s economy, according to many analysts. Not only does it discourage new foreign investments, which are desperately needed, in fact key to economic revival, but also “it creates obstacles for real economic growth and integration with the world economy.”

Friends in Starobelsk are pretty much saying the same thing. The economy is getting worse every day. “The rich have everything, the rest of us barely make it,” Olga, a pensioner, lamented. Business is bad; unemployment is bad; prices for everything, the basic necessities of life, are up, way up; wages are down or non-existent; local governments are bankrupt and, worst of all, more and more people are living in poverty, an alarming increase that bodes ill for this community, and for every community across Ukraine.

I’m considered an optimist around here, but nowadays even I wonder what will happen. Protests are growing. People are calling for new elections and changes in the tax codes, which favor the rich and hurt small businesses and working people. People are desperate.

Where will this all lead? Andrey Kurkov, a Ukrainian writer, says in a BBC report “the main question is whether economic hardship will further dampen Ukrainians’ interest in politics or spark popular protests. The latter is more likely.” I hope he’s right. There are signs on the horizon, protest signs among them, that may turn the tide.

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