Why Ukrainian reformers should not fight at all costs to restore “justice”

An empty treasury, a falling hryvnia, a recession in the economy, and an off-scale level of corruption - this is not a complete list of the achievements of the collapsed regime of Viktor Yanukovych. Add to this the lag behind neighboring countries in terms of the depth of reforms carried out during the post-Soviet years and in terms of per capita GDP, and it will be clear why members of the current Ukrainian government call themselves kamikazes. Immediately after Yanukovych fled, on February 22, I discussed the prospects of Ukrainian reformers with Kakha Bendukidze , the founder of the Tbilisi Free University, a businessman and one of the authors of Georgian liberal reforms. An eternity has passed since then. But the threat of war seems to have receded, which means that the issue of Ukrainian economic reforms is again on the agenda.

— What could be a plan to combat corruption in Ukraine consisting of six or seven priority points? Not in order of importance, but in order of listing.

— From what I heard, it is clear that the most corrupt areas in Ukraine are government procurement, the judicial system, and tax collection. If there is political will, then we can launch a frontal attack. And make reforms where you want and can at the same time, without fear of depleting political capital. It is possible to reform public procurement - let's make transparent electronic procurement, there will be big savings. There will be a lot of dissatisfied people, but not too many, not a lot - a few hundred.

— The logic of collective action, which works in the opposite direction: tough popular reforms.

- Yes, they have a very limited number of victims.

- That's why they are popular.

“They won’t be particularly popular, because no one will really see the results.” There are reforms whose results are obvious. The disappearance of queues for receiving government services, for example. Since in Ukraine a lot of things are government services, I think there are no problems here. Hospitals are starting to work differently...

I think the main thing we need to fight for now is transparency. The fight against corruption will be supported in society. And other things - insofar as they can pass.

Money and politics

— How should transitional justice work and how long should it last? According to [senior fellow at the Peterson Institute for International Economics Anders] Åslund , “Family” Yanukovych’s stole $10 billion a year from the budget. Any government that seeks macroeconomic stabilization and budget balancing could greatly benefit from this money...

— What part of GDP is $10 billion?

— More than 5%. Another way to look at it is that what has been stolen over the past three years amounts to a total of two packages of financial assistance from Russia. Is it worth fighting for the return of the loot?

- Well, how will you do this? It's a question of how lasting this revolution is.

If this is the last revolution - “we are creating an independent Ukraine, this is not the same country as it was before” - then we can say: that’s it, we’re starting from scratch.

Finding where someone stole something - oh. Relatively speaking, 15% of GDP was stolen. If you start fighting now to restore justice, then in the next three to four years you are doomed to stagnation. Because you are sending a message... When they received this money, they did not put it in large safes, but bought some assets. This means that all assets in Ukraine are tarnished.

— Not everything, only the assets of businessmen with political connections, politically connected .

— Describe a simple recipe for how to determine which assets are damaged and which are not. Imagine, I’m walking down the street and look at some beautiful building or restaurant. How can I determine whether he is politically connected or not?

- What do you want - to eat or want to buy?

- I want to buy it.

— There is no threat to bona fide purchasers.

— Or maybe the owner of this restaurant, store, hotel stole money from government procurement, gave a bribe to the tax office with it, and ultimately did not pay taxes. I buy this asset, and the tax police come to me. Well, why do I need this? I'd rather wait or buy in another country. As a result, you will have no growth for three years.

- This is a death sentence for any government.

- Right. Over these three years you will lose exactly the same money. 15% of GDP, or even more, will be thrown away in order to restore justice.

- This is an argument. But on the other hand, in countries like Ukraine, the most profitable investments are investments in politics. On January 2, I spoke with the mayor of Lvov, Andrey Sadov. One of his questions was right on target: how to make sure that people come to power not to steal money, invest it in an election campaign, and then steal the money... How to end this political perpetuum mobile? Probably, both carrot and stick are needed here. The whip - in the form of sanctions for making money through politics...

“It just seems to me that the search for this money will lead nowhere.” I think we need to pass election laws to reduce their sensitivity to money as much as possible. The first is maximum transparency of campaign funds and limiting individual donations when you cannot donate, for example, more than $50,000. Of course, this must be well controlled.

The second is state funding of political parties. This measure is controversial. I know a lot of normal people who are against it. But it allows parties to exist that are not willing to sell. When the middle class is not formed, long-term interests are not formed, institutions that allow this class to maintain political preferences are not formed, parties are very personalized... Klitschko’s party - what is it, right or left?

— Right-wing centrists.

- Is it really that obvious? How are they different from the Party of Regions?

— Regions is such a Soviet ideological party.

— Is she center-right?

— I would call them right-wing socialists.

— But in reality, this is Yanukovych’s party, otherwise it’s Klitschko’s party. Tomorrow Klitschko will change his mind, and there will be no game.

The most correct thing, of course, is to suffer for 40 years in all this crap so that the right political field is formed, so that it grows. But if you think that there is no time, then you can stimulate growth (which is always debatable whether it is possible to stimulate growth). If you finance parties, then they do not exist because there is a person who brings money. If a party has $5 million from the state and the leader is Sidor Sidorovich, then there is an incentive to fight for his removal if you see that you can lose the elections with him. And you understand that if he doesn’t bring money, the party will not disappear.

— That is, the leader ceases to be the main fundraiser.

— Not even a fundraiser, but an investor. Our main investor ( Bidzina Ivanishvili ) directly headed (the current ruling Georgian Dream party). Large fines should be issued for violations of campaign finance rules and an effective, transparent enforcement mechanism should be maintained. It's easy and simple to say, difficult to do, but nevertheless...

—Where can we find an independent, depoliticized body that will punish dishonest political struggle?

— Depoliticized is difficult. Multi-party. This system has a minus. It greatly limits the entry of new parties. But there are no ideal systems; something will have to be sacrificed.

Politics and money

— In Ukraine, with the help of democratic procedures, a certain financial and industrial group or organized criminal group, the political wing of which was the Party of Regions, came to power on the second attempt and tried to undermine democracy. In 2004-2005 the financial and economic power of this group was not undermined. If it is not undermined - logically speaking - Ukraine will face this problem for the third, fourth, fifth time.

- How will you blow it up? N (Bendukidze asked not to mention the names of Ukrainian oligarchs who were discussed during the interview, in the press - Forbes. ) will you dispossess them?

— I have questions for N, but I’m talking about something else. The bosses of this group must bear specific responsibility for the stolen goods.

-Won’t they run away?

- If they run away, put them on the wanted list. The robbery took place in front of everyone. There are online resources that compared the gap between purchase and market prices at tenders. The new prosecutor needs to make 20 clicks and proceedings can begin.

“The price of all this will be the lack of economic growth.

— So it’s impossible to deal with embezzlers even in targeted mode?

- In some very targeted way - perhaps. That is, with Yanukovych personally.

— What about crooked privatization deals? You yourself told me that in Georgia, people who profited from state property under Eduard Shevardnadze had to pay extra.

— There weren’t many such episodes. I was involved in four such transactions where I understood that I could conduct these negotiations without entrusting anyone who could make money off of it. I took on a huge risk - to be accused of corruption (in the end I was accused anyway). No one is happy when they ask him to pay an additional $20 million.

All such attempts in Ukraine will boil down to the fact that the easiest way is to come to [Lakshmi] Mittal, let him pay extra for Krivorozhstal. He is not Ukrainian, he will not bring money to the prosecutor’s office, and will not bribe journalists.

— Mittal also has tools. Yanukovych tried to do this and ended up getting his brains kicked by Nicolas Sarkozy.

— Yanukovych did not have popular support. And here everything will be under the slogan “Let’s restore justice.”

Restoring justice aimed at the future (“We will have justice”) is a good thing, but how to restore justice that has already been violated is unclear.

Then you must eliminate the entire oligarchic class. Let's take NN for example. If justice is fully restored, how much money should he have left?

— I admit, something like a billion dollars of debt to Gazprom .

“Will he bear it all calmly?” Hardly. He will fight fiercely. Or he will leave the country, and you will receive nothing if he has liquid assets.

- He has factories.

- You will come there and say: without trial or investigation, on the basis of revolutionary legal consciousness, within 24 hours we order you to give up everything and never sue the state again? It won't be like that. You are dooming these assets for many years to the fact that they will be under litigation and no one will invest in them.

- Let's step aside a little. There is a circle of people who acquired their assets through political connections and bribery. How to remove the sting from them and is it necessary to do this?

- You understand: it is necessary - but impossible. You cannot draw a line: where is the oligarch, where is the young oligarch, micro-oligarch, and where is the entrepreneur. There is no such border. You affect everyone. On the contrary, we need to remove fear.

A good example is what happened in Georgia in 2012. They chose a new government. Economic growth should not stop under the new government - it has not done anything yet. It should continue at a minimum, and maybe even accelerate: they [the currently ruling Georgian Dream coalition] say that everything will be better, more transparent, no violence, business will be free, and so on. Growth has stopped. Why?

Because there was a slogan: we will now restore justice, we will expose and punish everyone who was associated with the previous government. This creates uncertainty.

I want to buy this company, but who knows what will happen there. I want to buy another one - who knows. And if I also financially supported the previous ruling party, then this is the worst option. Maybe I will be punished too? So this means you need to take money out of business, put it in bags and wait to see what happens.

— You describe the fear multiplier: we want to punish ten, but we will paralyze them all. In 2005, Yulia Tymoshenko chose exactly this line, which cost her the premiership. Grigory Yavlinsky at one time promoted the idea of amnesty of capital. The main goal of this mentality was to take the political sting out of the oligarchs, leaving their businesses alone.

- I don’t understand how.

“ The point was that their property would be amnestied, perhaps with the payment of some kind of tax, while in fact they - I don’t know how this can be spelled out or whether it is possible - are disqualified from any participation in politics. They are essentially deprived of their civil rights.

- These constructions have nothing to do with life. How is this disenfranchisement? Are they deprived of the right to express an opinion? “It would be nice if our schools worked better” - “You’re 15 years old!” He will not be elected, will never vote? Few of them vote anyway. And because, so to speak, NN will come to the polling station, what do you care? Was he elected somewhere?

— Policy financing is also one of the restrictions.

— How can we ban the financing of politics with black money? It is already prohibited.

— From the point of view of economic feasibility, it is difficult to disagree with you. On the other hand, the government must somehow sell this story to people. We're not touching anyone again. Nine years ago they didn’t touch anyone and got what they got...

- Yes, maybe we need to touch someone a little. Slightly.

— Invite the oligarchs to contribute to the reform support fund...

- This is one of the ways. Depending on the seriousness of the government's intentions, in one case such a fund will collect $10 million, in another - $100, and in an incredible case - several billion.

— Will the amnesty be perceived by the leaders of financial and industrial groups as a weakness of the new regime? How can you stop them from falling back on their old tricks?

- You will have new laws, new executors. If they don’t work, then - no matter who - the old oligarchs or the new ones will take advantage of it. The problem is that otherwise you destroy capital. You are not only making a revolution, but also introducing war communism.

The destruction of capital is a process that takes many years, it prevents the creation of new capital, and without new capital there will be no economic growth. The energy of the collapse of existing capital will shift Ukraine's economic clock back.

One of Ukraine's problems was that it loved its factories too much.

If she stops loving them, the ineffective ones will die off, the effective ones will remain, but at the same time it is necessary to create conditions for economic growth, for the emergence of new companies. Look at the list of S&P500 or Fortune 500 fifty years ago and today: and it turns out that only two companies there have survived, the rest are new.

Ukraine has such a wonderful example as WhatsApp. A guy from Kiev came to America, created a company, sold it for $19 billion . The former Ukrainian earned $11 billion. Which Ukrainian businessman has $11 billion?

— Akhmetov, according to Forbes, has more. Everyone else has much less .

— A man was born and raised in Ukraine, left at the age of 16, he has 50 employees, and he earned $11 billion. We need to create an atmosphere so that this is possible in Ukraine. And then no one will remember such a problem as the oligarchs.

— In fact, the key question is how to destroy the coalition, which, under populist slogans, closes access to everything new. 90% of Ukrainian owners and businessmen will subscribe to the words that it is necessary to support the national manufacturer.

“And it’s the same in America.” And in France. Economic nationalism is making a comeback around the world. You know, I was shocked when I discovered one day that the Ukrainian agricultural oligarchs were fighting against land ownership. It was very strange for me. The “keep out” ideology.

-Who can curb this coalition?

- People. In Ukraine, everything happened around Europeanization. I think the mandate for this is now clearer. Do Ukrainian oligarchs want to protect themselves? Of course, who doesn’t want to protect themselves? When these people get the deciding vote, that's the problem.

Kakha Bendukidze: “You cannot draw a line between where the oligarch is and where the entrepreneur is”