30 years of capitalism in Ukraine: a lesson in the horrors of the market economy

The 30-year anniversary since the fall of the USSR and the restoration of capitalism in Ukraine was marked by celebrations in Kiev on 24 August. Front-and-centre during the festivities were former presidents Yushenko, Kuchma and Poroshenko, who all presided over the transition to the market economy. But behind the jubilation lies three decades of mounting poverty, inequality and repression. This is the real story of capitalism in Ukraine.

The current President, Volodymyr Zelenskiy, ousted presidential oligarch Poroshenko in 2019, in part by appearing to distance himself from relying on the latter’s patriotic hysteria. But Zelenskiy’s Independence Day speech was filled with Poroshenko’s brand of swaggering chauvinism, with the president waxing lyrical about Ukraine’s grand national legacy:

“Orthodoxy originated here, the Old Slavonic language originated here…We are a young family from the glorious dynasty of Kyivan Rus’... We are descendants of a powerful country that was the center of Europe.”

And so forth.

Perhaps the most ridiculous moment of the whole speech was a proud reference to the 1616 raid of Tatar Kaffa (Crimea) by a host of Cossack mercenaries, a typically brutal medieval raid which Zelenskiy apparently regards as a great source of national pride for Ukranians today.

For the majority of his speech, Zelenskiy talked about all of the “accomplishments” of the young Ukrainian state, mostly in the years during which his Servant of the People Party has been in charge.

Zelenskiy's speech on the anniversary of the restoration of capitalism to Ukraine was full of nationalist swagger, but could not wash away a legacy of impoverishment and decline / Image: official portrait

The most striking thing about the speech (which can be read in English here) was the discrepancy between Zelenskiy’s zeal for his party’s record in government, and how little has actually been achieved in the past three years.

For instance, he proudly declared that: “For the first time in 30 years, Antonov [a major, state-owned aerospace company] is building three planes for the state. New tanks and helicopters with Ukrainian blades are being built for the army this year… A powerful country is reviving its naval fleet, building naval bases and building corvettes.”

In fact, Ukraine’s once world-renowned aircraft and naval industries are a shadow of their former selves. They were decimated by capitalist restoration, as tens of thousands of laid-off workers can attest.

This decline was exacerbated by the conflict between Kiev and Moscow, which severed links to important subcontractors in Russia; and also by increased reliance on foreign equipment supplied by Kiev’s imperialist allies.

The continued demand for Antonov’s planes is a testament to how developed Ukraine’s aerospace technologies had become in the USSR, before independence. On the basis of this legacy, Ukraine can still boast building the largest airplane in the world.

However, the production rate is at a fraction of what it was before. The situation with shipbuilding is even worse, with the famous Mykolayiv Shipyard starting bankruptcy proceedings late last year.

Zelenskiy further bragged about building “thousands of kilometres of roads. Hundreds of schools, kindergartens, hospitals.”

It is not out of the ordinary that a country with a population of over 40 million would build infrastructure on this scale, as these things need to regularly be rebuilt and maintained.

What he neglected to mention is the declining quality of this essential infrastructure across the board. Roads off the main highways are notoriously dangerous, and the quality of schools and hospitals is in severe decline, with programmes started under Poroshenko reducing the presence of state medical facilities in rural areas.

In 2019, Zelenskiy made a lot of noise about fighting corruption. In his speech, he hailed the record of a government “which fulfills its promises and prevents its deputies from enjoying immunity from the law.”

However, these new standards to eliminate political immunity are applied very selectively. For example, former president Viktor Yanukovich, who was ousted by the Euromaidan uprising in 2014, remains in exile. Meanwhile, Poroshenko was allowed to sit in the front row during the Independence Day celebrations in Kiev, despite going on record last year as colluding with a foreign power to remove an inconvenient prosecutor. All trial proceedings against him have been dropped.

Given the lack of any substantial material achievements, Zelenskiy littered his speech with purely symbolic Euromaidan slogans about the virtues of European integration.

“[Ukraine has established] democracy for the first time,” he said. “[It will become] a NATO partner with enhanced opportunities [and] will be officially supported by others when it applies to join the EU… such a country, it won’t need to ask for an invitation, others will invite it.”

Notwithstanding these empty promises of prosperity and democracy under the auspices of the EU, in general Zelenskiy’s speech defended the legacy of capitalist restoration in Ukraine. In reality, this has resulted in nothing but increasing misery for the vast majority of the population.

The numbers behind the misery

A recent article on BBC Ukraine, which set out to celebrate the anniversary of capitalist restoration, could not help but reference some shocking data on the changes in Ukraine from the fall of the USSR to the present day.

For example, the population declined from 52 million in 1991 to 45 million in 2014. This can be attributed to the mostly economic emigration and lower birth rates, both resulting from worsening economic conditions.

The number of children (0-17 year olds) in 2021 (7.5 million) has been almost halved, from over 13 million in 1991. Separatism and the economic crisis following the civil war in 2014 reduced the population to around 41.5 million by 2021. One should also keep in mind that many of these are people who earn their wages performing difficult labour in wealthier countries, and only return to Ukraine seasonally.

Already in 1989, life expectancy in Ukraine began to fall as a result of “market reforms” and instability, reaching a low of 67 years by 1998. During that period, the average life expectancy in Europe and the United States increased by 9 to 10 years.

Only in 2013 did the life expectancy in Ukraine finally recover its 1988 peak of 71 years, currently standing at 73, somewhat lower than the global average. The nationalists talk about the lives lost under the USSR to famine and political repression, but studies about the 1990s show that the economic collapse following capitalist restoration contributed to millions of early deaths, comparable to the number of lives lost to famine in the 1930s under Stalin.

At the other end of the age scale, the number of pensioners has gone from 13 to 11 million from 1991-21. This is a far-smaller decrease than the youth population. One factor added to this was the increase in retirement age from 56 (the norm under the USSR) to 60 years old.

This section of Ukrainian society has probably had it the worst. Average pensions stand at around 3,700 hryvnia (£101) per month, but 65 percent of pensioners receive less than 3,000 hryvnia (£79) per month. Approximately 80 percent of single pensioners in Ukraine live below the official poverty line. This is without many of the free or low-cost health services and medicines they could expect under the planned economy.

The deleterious market influence on healthcare was further exposed by the COVID-19 crisis, where statistics indicate there were at least 80,000 excess deaths over recent averages. Conditions were especially bad for medical professionals, who were left with very little government support, leading to many quitting, in turn damaging the capacity of the health sector to cope with the pandemic.

This mass poverty experienced by Ukrainians since the fall of the USSR is thrown into sharp relief by the obscene wealth of the upstart bureaucrats, managers and gangsters who made billions looting state assets in the ‘90s: all while the lifespan of the average Ukrainian fell by an average of four years, and their economic situation hit rock bottom.

For all of Zelenskiy’s talk of being ‘anti-oligarchy’, he owes his entire career in entertainment and politics to close cooperation with the family of billionaire oligarch Igor Kolomoisky. Despite a rift opening between the two of them – with US imperialism assisting Zelenskiy in clipping Kolomoisky’s wings over corruption charges – the president is bound by a thousand threads to the rotten oligarchy, and the capitalist system it represents.

The free market does not bring democracy

Capitalism permits certain democratic freedoms, only so long as the economic interests of the ruling class are left intact. The victory of the bourgeoisie over the feudal aristocracy in western Europe necessitated leaning on the mass of peasants and proletarians. This meant extending a limited degree of democratic rights downward.

It was not the generosity of the bourgeoisie but class struggle from below that extended and preserved these rights. Still, as Lenin wrote in State and Revolution, formal bourgeois democracy is merely a shell for the dictatorship of capital, by providing a limited outlet for the frustrations of the working class, who are periodically permitted to choose “who robs them”.

For all the talk of capitalist 'democracy', the 1991 independence referendum itself was manipulated by the pro-capitalist bureaucracy, and had to be held twice to get the desired result / Image: public domain

And as the French bankers’ support for Napoleon or the Weimar capitalists’ support for Hitler demonstrate, the bourgeoisie will jettison their democratic pretenses if they feel it is in their immediate interest to do so.

Despite all of the talk about the democratic transition of the ‘90s, and the involvement of the masses therein, the events of the ‘90s in all post-Soviet countries were steered, not by the will of the people, but by the financial and personal interests of a tiny minority of bureaucrats and oligarchs.

A deluge of media propaganda celebrated the virtues of Western European democracy, while Western capital helped to finance and massively profit from the destruction of the post-USSR economy over the people’s heads.

The 1991 independence referendum itself was manipulated by the pro-capitalist bureaucracy, and had to be held twice to get the desired result.

While there was no equivalent of the Yeltsin coup in Russia, electoral fraud was a regular occurrence during the 1990s. When the Communist Party of Ukraine was almost elected back to power in late ‘90s, backroom deals between state bureaucrats, the oligarchy and Ukraine’s media barons allowed Leonid Kuchma and the Ukrainian capitalists to cling onto power.

‘Democracy’ in capitalist Ukraine was from the beginning characterised by the regular murder of journalists and various political figures. Voting was allowed, but most of the repressive elements of the USSR’s degenerated workers’ state continued to be exploited by the oligarchy, who had the economic power, and held the government bureaucracy in their pockets.

This process continues today, with the imprisonment and murder of journnalists who go against the pro-nationalist status quo under the post-Euromaidan regime. Meanwhile, repressive measures have been ramped up in the past year against opposition media, with new sanctions introduced on a monthly basis.

Zelenskiy is also utilising repressive measures against different sections of the ruling class. His sanctions on opposition media and supposed “war against the oligarchs’’ have led the BBC to compare him with Russian President Vladimir Putin.

But just as Putin exiled Boris Berezovsky and Mikhail Khodorkovsky, while allying with most of the remaining oligarchs, Zelenskiy’s “war” is only waged against those sections of the oligarchy that do not support him, such as Viktor Medvedchuk, who is currently under house arrest on charges of treason and corruption.

Despite clamping down on individual opponents, and the internecine squabbles between different oligarch clans, Zelenskiy is a loyal representative of the interests of Ukrainian capitalism as a whole.

In sum, post-transition democracy in Ukraine was a sham, behind which the oligarchy and bourgeois bureaucrats used state power to grow fat off the remains of the planned economy, and deny the workers a decent existence. Zelenskiy is continuing in this dubious tradition.

National independence and imperialism

In his work Russia: From Revolution to Counterrevolution, Marxist theoretician Ted Grant commented on the perspectives of the newly independent Soviet republics:

“[T]he break-up of the USSR gave rise to acute economic problems given the extreme interdependence of all the Republics after decades of centralised planned economy. As a result, both centrifugal and centripetal tendencies are at work. Only the Ukraine has a relative economic basis for independence, but even there, the Ukrainian economy is still tied by a thousand links to that of its powerful neighbour.

“Decades of Stalinist repression has produced a powerful urge of the peoples to be free from the yoke of Moscow, but, as Gorbachev remarked, the populations of all Republics are mixed. The chauvinists of each Republic display the most brutal intolerance towards the national minorities in their own states, who, in turn, are terrified of becoming oppressed minorities in small newly ‘independent’ Republics…

“Experience has shown that the break-up of the USSR in which the economies of all the republics were linked together, signifies a disaster for all the peoples. The situation is not viable. Sooner or later, one way or another, they will be reunited with Russia. If this is done on a capitalist basis, the national oppression will be enormously intensified in what will then be an imperialist relationship. But the experience of ‘standing on their own’ has been so disastrous that even a great proportion of the people of the Ukraine, with gritted teeth, would probably prefer to go back. Only a regime of workers’ democracy would guarantee genuine freedom for all the republics in a free federation with a common plan of production, in which control would be in the hands of the working people, with the fullest autonomy and a guarantee of the right to self-determination.”

In the age of imperialism, independence for economically weaker capitalist countries meant forgoing their rights to larger imperialist powers around them. Unlike smaller states like the Baltics or those in the caucus, the Ukrainian ruling class managed to keep some degree of independence by balancing between the influence of the local imperialist interests in Russia, and those of western imperialism of the US and EU. Both sides of this international conflict for profits had their own interests represented among the Ukrainian political class.

This situation was tipped off balance with the events of Euromaidan, resulting in Kiev-controlled Ukraine on one side, and separatist Donbass and Russian Crimea on the other. Both came under the influence of imperialism more than ever before.The Donbass is thoroughly dependent on Russia (while not getting official recognition from Moscow), while Zelenskiy courts the west, going on CNN to emphasise how important it is for the US to get more involved in Ukraine.

But despite the increased influence of American and European imperialism in the last decade, the Ukrainian capitalist class and the state apparatus retain some degree of independence and are somewhat of an unpredictable nuisance to their foreign allies. This can be seen by their recent rapprochement with China, the main rival of US imperialism.

The long view of history

The legacy of the planned economy in the USSR allowed the remnants of the backward Russian Empire to almost catch up to the advanced capitalist nations in just half a century. This progress was marred by the fact that a Stalinist bureaucracy was sitting at the head of it.

A number of conquests of 1917 were reversed, including the gains for oppressed nationalities to express their self-determination, including in the cultural sphere. The bureaucracy adopted many of the features of the disgusting great-Russian chauvinism previously existing under the Tsar, and this was expressed in the internal politics of Stalin’s USSR from the late 1920s onwards. The workers' democracy from the revolutionary days was replaced by the dictatorship of the bureaucracy.

Decades of bureaucratic rule had the effect of throwing back consciousness. The memory of October faded away. As the bureaucracy slowly brought the economy to stagnation, illusions in the “market” started to grow amongst sections of the masses. The leaders of the CPSU, which had previously based themselves on the planned economy, now jumped ship and started the process to restore capitalism, hoping to become owners of the means of production which until that point they could only administer.

The traditions of the working class had been largely erased by decades of dictatorship. In the absence of a revolutionary leadership putting forward the idea of genuine workers' democracy, the workers were left at the mercy of the new Ukrainian capitalists. Most of the top leaders of the Communist Party and state trade unions became ardent supporters of the new capitalist regime. The rest were all too happy to find their place in the new order as a loyal opposition, now able to enjoy their privileges less discretely than in the old days.

The events of Euromaidan brought more disorientation and division along nationalist lines. As the working class goes through another cycle of disappointment with their capitalist rulers, the once stable world-capitalism is going through turmoil.

The streets of Paris that were once symbols of leisure for western-gazing Ukrainians turn more and more into symbols of open class struggle. The Putin regime, a symbol of competent government for millions of Ukrainians in the south and west, is also cracking under pressure of the capitalist crisis, as the reduction of its vote in the recent federal elections attest.

Meanwhile, the accumulation of death and misery at one pole of society, and obscene profits at the other during the COVID crisis has again revealed the utter barbarism of the capitalist system.

The time for socialism in Ukraine and the former USSR has not passed. Its necessity will only become more apparent as the crisis of capitalism continues to provoke an intensification of the class struggle throughout the world.