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The driving force of economic development

Author : Volodymyr Cherniak

The economy rests on three pillars: these are institutions, investments and innovations. The main crisis in Ukraine is institutional one.
23:18, 28 January 2019

Open source

Without overcoming the institutional crisis, other reforms in our country are virtually impossible. Only their imitation is possible. Our institutions are inadequate and ineffective. In this regard, there is an investment and innovation crisis.

Investment and innovation is not enough to make systemic technological change. The consequence of this is a technological lag, deindustrialization and the transformation of the country into a raw material appendage and a reservoir of labor. Mechanical engineering, shipbuilding, and aircraft construction will not develop.

Ukraine is in 134th place in the world in terms of GDP per capita. Of course, the factor of war and the seizure of territories played an extremely negative role.

GDP collapsed twice (by the way, this is not only the fault of the war). But still, even in these difficult conditions, it is necessary to act adequately, effectively and promisingly.

Without technological breakthrough Ukraine can stay behind others forever. The biggest current threat to Ukraine is the technological gap. Therefore, the most important task of the current moment is to overcome it.

The main driving force behind the development of the economy is innovative technological investments - internal and external. The future of our country depends crucially on them. In developed countries, deindustrialization is also taking place, but in a different direction than ours - towards innovative development.

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The main reason for our backlog is clan-oligarchic capitalism, which clings to monopolism. As is well known, any monopoly leads to decay. Ukraine faces an urgent need to dismantle clan-oligarchic capitalism on the basis of demonopolization, the transition to a competitive market economy, the creation of joint-stock companies, when broad sections of the population become co-owners of enterprises, that is, the transition to "people's capitalism."

It is necessary to radically change the tax system. In our country the poor pay more taxes than the rich. Obviously, a progressive tax system is needed. Radical wage reform is imperative.

Financially unjustified and immoral gigantic wage gaps should be eliminated. In civilized countries, the maximum wage is 5-7 average wages. It is also extremely important to ensure access to credit.

The national bank should take care not only of the hryvnia exchange rate, but of available loans. Raising the discount rate it makes loans expensive and leads to a financial crisis.

Two main conditions are necessary for the transition to economic growth: a favorable investment climate and an increase in the purchasing power of the population.

Where to get money for a breakthrough? In the offshore ($ 120 billion were brought there from Ukraine), at customs ($ 5-6 billion disappears annually), "in the shadows" (35% of the economy), in financial "black holes", in "tax holes", in corruption schemes.

I cannot understand how the power (all three branches of it) in a poor warring country could not block offshore companies and bring order to customs?

Read the original article at 112.ua

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