Unemployment rate in real sector is close to catastrophe: What can we do?

Author : Olexandr Honcharov

Source :

Perhaps for the first time we, representatives of the business community, can formulate a modern national idea that could unite power, society and business for the development of the Ukrainian labor market and its integration into the world system.
13:47, 1 June 2017

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For a long time we haven’t been witnessing such a big problem of unemployment. And many of my old acquaintances are not used to work in such realities of the Ukrainian economy. Of course, this is a huge problem. How to solve it? For example, the US and China, they successfully solved this issue through infrastructure spending. And the creation of new jobs through public spending is the path that has long been proposed by the famous English economist John Keynes. But, unfortunately, Ukrainian prime ministers can’t realize such project, since invariably this process launches the support of banks, instead of real sector of economy with creation of new workplaces.

Our politicians do not understand that the banking business is as good as the country's economy. Therefore, the main driver of the restoration of Ukrainian banking system is the real sector of the economy. And now how could we correct this imbalance in favor of creating new jobs? Of course, it is difficult to do this, given the budget deficit. Indeed, the task is very difficult. Well, let's see how Prime Minister Volodiymyr Groysman will try to do it.

By the way, recently unemployment has become an acute problem not only here in Ukraine, but also in a number of peripheral EU countries and even in the US. So now Donald Trump is compared not with Franklin Roosevelt, but with Herbert Hoover, who was the 31st president before the Great Depression. And going back to the forecasts of the American billionaire George Soros, I remind you, he firmly assures that now almost economic processes are run by China. In his opinion, now the Chinese not only influence the yuan's rate, but in fact they are responsible for fluctuations in the euro / dollar, yen / dollar rates, and also greatly affect the labor market.

I note, the role of China is really huge, however, the role of America is still greater, because the issue of world currency in the hands of the US Federal Reserve, and not the People's Bank of China. But China's GDP (at purchasing power parity) has already accumulated almost 26 trillion US dollars, so it can seriously affect the world economic situation and the dynamics of labor market development. It is clear that this deuce of superpowers does not need sharp fluctuations in the foreign exchange market and high unemployment. Accordingly, a package agreement is being prepared between them, in particular on the revaluation of the yuan, and in return, America renounces the policy of "quantitative easing."

Nevertheless, how such difficult situation with unemployment in the world could be solved? Will it be possible to agree on this "big deuce" if such serious disagreements were most recently demonstrated by the leaders at the G-7 summit in Italy?! Who will try to unravel this complex tangle of problems? And after all Soros will predict, that now all important this will be decided by this "big two", instead of the countries of "the big seven". The results of the G-7 summit in Sicily once again demonstrated that in today's world the problems with the division of labor have become increasingly acute.

Moreover, the long-standing single global system, which has not been divided into zones since the late 1980s, however, recently has experienced enormous difficulties. And all these discussions between scientists and analysts about the "withdrawal" of the US dollar from the post of the world's main currency, the emergence of new economic forces and growth centers - all this, in fact, is a consequence of the slow transformation of the global division of labor system. In this situation, for us, Ukrainians two key questions logically arise. First, is the disintegration of the current unified system of the division of labor possible? And if "yes", then how will this affect our national labor market and in general the economy of Ukraine?

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But right now, I must admit, we are losing our traditional markets where we sold Ukrainian goods and services for many years, quite quickly. Because of this, accordingly, we began to lose income, which led to the growth of social problems and so on. If by the end of 2013 the GDP of Ukraine in dollar terms amounted to $ 177.834 billion, then in the last 2016 we closed with a volume of $ 93.812 billion. How to save the country's economy? Let me remind you, the crisis is not won by the one who is the most powerful, but the one who is the most resourceful and resolute. So now we need to talk about the need to double the GDP of Ukraine in the next 5-10 years.

At the same time, unfortunately, the structure of our national economy is increasingly changing from industrial-agrarian to agrarian-raw, and, accordingly, unemployment is increasing. After all, we see no new jobs opened in high-tech industries with high surplus value; on the contrary, they are sharply reduced. What should we do? First of all, I would suggest the creation of the Ukrainian Development Corporation. The history of the active creation of development corporations dates back to the 1950s and 1960s. Today there are more than 100 development corporations in the world. And we should not lag behind countries with developed and high-quality economies.

In the conditions of the transformation of division of labor world system, we simply must accelerate the formation of a reliable base for a new economic model with the provision of quality investment services in Ukraine. To do this, it is important to concentrate on the implementation of a number of specific tasks.

First, to accumulate financial resources for investment in the Ukrainian economy with the involvement of more than 1 trillion UAH by the end of 2018, mainly in the domestic market of joint investment.

Second, to restructure corporate debts of enterprises and financial institutions, reducing by 40-50% the amount of bad debts by the end of 2018.

Third, give new growth points for the Ukrainian economy, creating up to 30 industry holdings and trading houses with the corresponding institutional infrastructure of the collective investment market.

Fourth, to create in 2017 the National Financial Center of Ukraine, including the National Universal Stock Exchange - a licensed stock exchange with an integrated trading and settlement infrastructure, including the stock, commodity and currency sections of futures and options markets. This stock exchange like the National Depository of Ukraine with clearing and settlement chamber will be part of the National Financial Center of Ukraine.

Fifth, before the end of the current year 2017, we should restart the economic and, above all, military-industrial and agro-industrial policies, providing incentives for development and breakthrough technology based on public-private partnership.

Sixthly, to provide a comprehensive approach to solving social, economic and financial problems, forming the right perspective for the development of the labor market, having established the Development Strategy Centers under the regional state administrations.

Seventh, to organize the activities of the Center for Financial Restructuring of Insolvent Banks’ Assets in accordance with the practice of the work of FDIC (US Federal Deposit Insurance Corporation).

Eighth, at the legislative level, organize the Ukrainian futures market, including modern instruments of financial derivatives for hedging the risks of domestic and foreign investors. To fulfill these tasks, we have already developed and prepared concepts, strategies and integrated programs, and only the political will is needed to implement all that has been planned.

Perhaps for the first time we, representatives of the business community, can formulate a modern national idea that could unite power, society and business for the development of the Ukrainian labor market and its integration into the world system. It should have the main fundamental purpose - if not to eliminate this shameful huge gap between the poor and the rich in our country, then at least to reduce it as much as possible.

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