Economic Growth with Equity: Which Strategy for Ukraine?

Putting Ukraine back on the path to prosperity requires that policy makers stop letting economic crises dictate the policy agenda. Short-term problems need to be dealt with in the context of a long-term strategic view focused on improving the living standards of Ukrainian People. What strategy should Ukraine follow? This report identifies and evaluates three sharply different alternatives, all of which are under active consideration today as Ukraine considers what to do after ten years of halting reforms and economic decline. These options for the future include (a) the Preservation Strategy, (b) the Protection Strategy, and (c) the Competition Strategy. The preservation strategy, which is particularly popular among older people nostalgic for their way of life during the days of the Soviet, recognizes that it is neither possible nor desirable to return to the past, but seeks to preserve as much as possible of the state-dominated economic and social welfare systems of the Soviet era. The role of government would change little under this alternative. Neighbouring Belarus is a good example of a country that has followed this strategy. The protection strategy, which is particularly popular among both private and public sector industrialists, invokes the infant industry argument as a basis for throwing up trade barriers, providing subsidies, and extending tax privileges so that Ukraine's industry enterprises - particularly those that are heavily energy dependent and technologically competitive enterprises. The protection strategy, which has been....