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Ukraine's Cabinet wants to shrink into economic nationalism

Author : Serhiy Fursa

Source : Facebook Profile

Economic nationalism is another kind of dangerous populism
09:00, 9 June 2020

Ukraine's Prime Minister
Open source

The government decided to sell its program to the population, basing it on the thesis of "Ukrainian economic nationalism," putting it under the guise of the idea that "everybody does it this way."

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What is economic nationalism? This is a new name for the old conventional protectionism. The Ukrainians have already faced it. For example, in the car market, when a domestic manufacturer gets some preferences. Nobody seemed to like it, except for this manufacturer, who, one way or another, went bankrupt anyway. They did not help it but just continued its miserable existence.

Why is that bad? Because it is bad for the economy. In each country, voters eagerly applaud politicians that stand for their own manufacturer against foreign one. It’s natural. But if the thesis is popular, it doesn’t mean at all that it is useful. Protectionism always harms the economy. The United States conducted a survey, it gathered 300 leading economists from leading universities and asked what they think about protectionism. Moreover, Trump is actively promoting such ideas. Absolutely all economists said that this is wrong, and it would harm the economy. But when the simple American people gathered, then the people, on the contrary, voted by the majority that it was good. And even when they learned that economists are against, they did not change their minds. Because it's some kind of boring economists. What can they know?

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However, this does not change the essence. Protectionism is harmful. How does it work? Very simple indeed. Firstly, this leads to higher prices. For you are limiting some imports that were cheaper than the Ukrainian counterpart. What does this lead to? Moreover, Ukrainians - either business or the population – face with rising prices. Because there is no cheaper product. And there is more. Rising prices lead to a general increase in inflation. And then someone says that the country has expensive loans.

And secondly, every action has a counteraction. This is like physics. Which is also very often not taught at school and then faced with the fact that the world is full of miracles. So, if Ukraine restricts someone, then that second also limits Ukraine. Ukrainian exporters. This is a game where everyone loses. And as a result, the opportunity for export decreases. People lose income or work. And instead of increasing jobs, we get their reductions.

Related: Ukraine’s industrial production falls by almost 17% in one year

What are politicians around the world doing this? Well, firstly, it is popular. And populism is also in fashion now. And secondly, lobbyism. Politicians are often sensitive to their own sponsors. And sponsors are usually some kind of big business. Which naturally does not like competition. And prefers to limit it.

Here is an example of Ukrainian nationalism in action. Right now. The government wants to help Ukrainian chemists. It wants to limit imports. As a result, fertilizers for Ukrainian farmers will be much more expensive. And they lose. And who wins? That's right, the oligarchs who produce fertilizers. So much for the motivation. And against the same background, the same people will tell you about the impoverishment of Ukrainian farmers, who must be protected from competitors from the west.

The second example of Ukrainian economic nationalism from the government is constant attacks on the Prozorro systems and attempts to tighten something up there. Only not those who give a lower price won, but people with certificates that they are patriots. Where it leads? Again, it will hit small and medium-sized businesses, which in recent years have gained access to government tenders. And secondly, it will increase taxpayer expenses. Will this help the Ukrainian manufacturer? It would definitely help Ukrainian power brokers.

Related: Car production in Ukraine falls by half

So do not try to hide behind patriotism when doing harmful things. Do not discredit patriotism. This is already enough done by Ukrainian politicians.

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