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The whole problem lies in Ukraine’s economic structure, - Erik Reinert

Author : Elina Beketova

Respondent : Erik Reinert

16:54, 6 October 2017
The whole problem lies in Ukraine’s economic structure, - Erik Reinert

Author : Elina Beketova

Respondent : Erik Reinert

Why Ukraine is poor, what should be done to overcome poverty, are there any benefits for Ukraine in its free trade agreements? Erik Reinert, a Norwegian economist, in the frameworks of 112 International Insight

16:54, 6 October 2017

112 Agency

Erik Reinert, a Norwegian economist, author of the book “How Rich Countries Got Rich ... and Why Poor Countries Stay Poor” (2007), that is in the top-50 of the most influential economic publications within recent 100 years according to the World Economics Association, spoke about Ukraine’s economy with 112 Ukraine TV channel's Elina Beketova in his exclusive interview.

Mr. Reinert shared his opinion on why Ukraine is so poor.

“The key determinant for wealth or poverty is the economic structure of the country. Ukraine used to be an industrialized country and it’s losing its manufacturing industry. And as it is losing its manufacturing industry, it is losing its population. So if we go back and look at the time of communism we thought communism was very different from the West. But when you look at it, it wasn’t that different. Because they were both cultivating manufacturing industry, they were competing in being No.1 in manufacturing. So what we thought that two different systems were actually very similar. […] They were following the same strategy. And now, with the triumphalism after the fall of the Berlin Wall, those lessons were forgotten. Some countries which managed to keep their industries do reasonably well, and those who lost their industry are doing poorly. Ukraine is becoming an agricultural country again. Agricultural strength is very good but that’s not enough. The problem is that you sell your wheat to Italy and you buy spaghetti back. You sell your wheat for 1 and you buy spaghetti back for a hundred. So you should get your manufacturing back, and not only manufacturing but also advanced services that go along with manufacturing. So I think the whole problem lies in the economic structure,” Mr. Reinert said.

Related: Economic Freedom of the World - Ukraine rates 149th

“You’re signing some free trade agreements. To me, it seems you are going in the wrong direction. You are getting into agricultural export and the EU has some very low quota for you. So you are trying to play a game and you are stopped by quotas. So you are in a very unfair game,” he added.

Related: 37% of Ukrainian economy in shadow, - Ministry of Economic Development

As for the reforms, Erik Reinert says the industrial development bank should be created in Ukraine.

“It is impossible to make a living from the pension, it seems impossible to even buy food. This is a serious problem. On the other hand, many of the banks are full of money, but there are no profitable investments to invest in them. So I think you should use the money that you actually have to create an industrial development bank and to use the skills that are here, skilled engineers and skilled workers. You have to get them back to work before they migrate,” he said.

Related: Growth or illusion: How to assess Ukraine's economic policy?

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