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Time for vulgar libertarianism: What to expect from Ukraine's new government?

Author : Oleksiy Kushch

Why vulgar? Because the current management format has nothing to do with the true concepts of a free economy, where the state plays the role of a "night watchman"
09:28, 2 September 2019

Open source

Ukraine has got the new prime minister and the new government. In the near future, we would see all the delicacies of vulgar libertarianism. Why vulgar? Because the current management format has nothing to do with the true concepts of a free economy, where the state plays the role of a "night watchman." The favorite thing of our reformers is taking beautiful wrappers of outdated Western concepts and wrapping terrible “lollipops” for the electorate. And this is because usual desocialization of the state and de-industrialization of the economy in favor of simple commodity cycles controlled by oligarchs is presented under the guise of libertarianism. After the global crisis of 2008 and the local 2014-2015 fall, they no longer want to participate in financing the social functions of the state, because the corrupt rents they receive in return no longer provide the desired level of profitability. The rental, corrupt economy is developing according to the “canalization” principle: at least $ 10 billion per year should be “funneled” from it. Now it has become more difficult to do. That is why the task of the government is to use budget and tax conducting to ensure that the corruption rent is filled with the necessary resource. Under these conditions, tax cuts, privatization or deregulation will not be converted into new opportunities for small and medium-sized businesses but into an increase in the profits of several financial and industrial groups. A new economic trend was born in Ukraine - "oligarchic libertarianism," something similar to the Polish magnates from the time of the Commonwealth in the 17th century when most of Ukraine was simply leased.

Related: Ukraine's new Cabinet: All you need to know about Minister of Finance Markarova

The example of the UK shows how libertarianism might work in a proper way. In the 80s of the last century, there was a massive sale of the state assets. If you sell cheaply (like the new pro-government team proposes) in order to relieve the state’s burden in the form of numerous state-owned companies, but do it honestly, then it is necessary to carry out denationalization, paralleled by the law, which would establish the state’s ability to receive additional compensation in case of growth of the capitalization asset. This model was applied by the Laborite government of Tony Blair in 1997. In the 80s of, the government of conservative Margaret Thatcher preached the idea of ​​total privatization of state assets, primarily energy, infrastructure, and utilities. All these assets were sold at a low price, and in the 90s a huge difference was formed between the price paid by private owners for them and market capitalization. Thus, a gigantic income of more than £ 100 billion was literally bubbled. The government of Tony Blair has developed a special taxation methodology. The coefficient was calculated: ninefold P / E (the ratio of the market value of a share to the annual profit accrued per share). According to this coefficient, “bubbled” businesses were selected. The formula for calculating the tax was as follows: the average profit for four years after privatization was multiplied by nine years and the tax rate of the windfall tax itself (23%). Companies in the field of telecommunications, transport, energy, water supply were targeted. As a result, £ 5 billion was raised in the state budget, which was used to finance the government’s New Deal, social welfare programs, including those related to the creation of new jobs, and government investments in education and science.

Related: New Prime Minister of Ukraine: Who is he?

But no one is talking about such a scenario in our country: they want to sell everything, including the railway, although those who are an especially stubborn offer to put kindergartens, universities, and customs on the list. The policy of misanthropes, when rational and cynical factors of narrow self-interest are placed above a man. The situation is programmed: after all, the strategy of vulgar libertarianism in a country, where 7 million full-time workers account for 12 million pensioners, cannot end otherwise.

The country’s new PM should be a visionary, who could combine Western recipes for success with a thorough knowledge of the specifics of the Ukrainian economy, as Japan once managed to transform Bushido’s militaristic code into a new corporate culture. Any mechanical transfers of Western patterns to Ukraine would not work.

The speech of new Prime Minister Oleksiy Honcharuk in parliament was perhaps the weakest speech in the history of Ukraine. We have not heard the theses about the new economic model of the country's development, the vision of the future. He failed to mention about overcoming poverty, although the level of the poor has been named. He also mentioned about the IMF and the promise of 9% loans. Not But nothing was said about how the country would carry out the promised economic breakthrough with a GDP growth rate of 5-7%. Not a word about the channels for attracting investment and points of economic growth, the mechanisms of its capitalization. Nothing was said about how rents from natural resources will be distributed or about the added value of a national product.

Related: Prime Minister Honcharuk announces tax reform from 2021

Unfortunately, we did not see philanthropist politicians in our government, such as Dr. Komarovsky, who could form a human-centered reform agenda.

In this regard, the figure of Oksana Markarova, the Minister of Finance, is indicative, which is a marker for the figurative perception of the budget and social policies of the past government and the current one. And apparently, here you can put a bold equal sign. The pyramid of public debt with high rates and short terms will continue to grow. And here the most ridiculous is the promise of President Zelensky to separate business from the public administration system: Markarova will continue to manage the issue of government bonds.

The ties between the government and business are quite strong, there is control over the affiliated connections, and the flow of insider information is carried out. And the most remarkable thing is that all this remains unchanged even in the format of the “new faces” power ...

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