If John Baird’s upcoming visit to Ukraine is to be successful, it must satisfy two overarching goals. The first will be to assure Ukraine’s interim leadership that Canada remains committed to supporting an inclusive and open democratic society that is tolerant of all minorities and political parties. The second is to find a way to wean the Ukraine away from its dependence on an informal economy. These two goals are intertwined and go to the heart of Ukraine’s structural problems.
Ukraine remains the only European country deemed essential to Canada’s bilateral aid program. Even before Stephen Harper came to power in 2006, the promotion of democracy in Ukraine was a long standing area of focus for the Canadian government. But clearly these efforts were not enough. There are two reasons for that.
First, trust is in short supply right now in Ukraine. The protestors have made it abundantly clear the social contract that legitimizes Ukraine’s leadership has long been broken and cannot be easily fixed. For example, when the protestors in Kiev speak of building a new Ukraine, it is not clear how inclusive they imagine their country should be. Key obstacles to achieving an inclusive and open political system include deep divisions between its ethnic minorities, radicalism on the far right, an increasingly disillusioned and impoverished youth, underemployment for women, and an ineffective press that is not free.
Second, there is the dysfunctional economy. Aside from Ukraine’s dismal economic performance, the country suffers from a negligible understanding of property rights that helps perpetuate a large informal sector. At the height of the recession in 2009 about 31% of Ukraine’s economy was part of the informal sector. Surveys show that about 16% of Ukrainian households rely on informal employment for their standard of living. An additional 25% of Ukrainians depend on informal activities to supplement their primary income.
For many Ukrainian households, in particular those led by women, an untaxed informal economy is one way of cushioning the impact of economic hardship. But it also guarantees that the corrupt practices of its leaders – regardless of which party they represent – continue unabated. Part of this reasoning relates to the low expectations that Ukrainians have of their government to provide public services in key areas such as health and education, but it also means perpetuating the absence of accountability that is systemic at all levels of government from the community to the region, to leadership in Kiev. The dynamics of a thriving informal sector and the failures in building accountable and good governance are apparent for all to see as claims of corruption have been levelled against the Yanukovych regime.
In the absence of a full understanding of how democracy promotion is effected through private sector development, it is possible that Ukraine’s (and by extension Canada’s) development goals will not be met and worse may be undermined. From our experience working on democracy promotion in the Ukraine, the common link between the two is trust. Trust is the basis for a fully functioning market economy based on contract, and it is the foundation for representative government. Therefore, in addition to support for democracy and good governance, Canada should strengthen is support for small and medium businesses as an entry point for improving the private sector, and strengthening the legal system underpinning contract law.
To achieve those goals, Canada has two essential ingredients working in its favour: a highly motivated and effective Ukrainian diaspora with active and prolific economic interests and an experienced civil society that is able to provide the kind of real training and educational support that is needed to sustain Ukraine’s transition to an open, tolerant, trusting and democratic society.
An important next step to build trust will be to engage all the various stakeholders including leaders of religious and ethnic minorities, elected officials and leading civil society organisations in a dialogue on Ukraine’s political, social and economic future. This dialogue should identify some common issues and then work its way through policy options by consensus. It is important the process be formally sanctioned by all religious, ethnic and political leaders. Its goal should be to directly influence the public service and to work with them to improve the country’s capacity for sound and effective public administration.
Milana Nikolko is an Adjunct Professor of Russian and European Studies at Carleton University and leads a small NGO in the Ukraine in support of democracy and open dialogue. Along with her fellow academics and students Nikolko was actively engaged in the Orange Revolution.
David Carment is editor of the Canadian Foreign Policy Journal and a Fellow of the Canadian Defence and Foreign Affairs Institute (CDFAI)