ABSTRACT
Unlike in Russia, where a radical free-market reform program is already in place, reform efforts in Ukraine have been hampered by the country’s focus on securing its independence and by the predominant position of ex-Communist Party functionaries, who have little enthusiasm for or understanding of the free market. While Russia moved forward with a “shock therapy” economic reform package in January 1992, contending factions in Ukraine engaged in a struggle over control of the reform process. The result was that a series of economic reform plans were drafted, adopted, and abandoned over the course of the year, and no substantial economic reform occurred.
The largest role in making economic policy was played by former Communist Party and government apparatchiks in both President Kravchuk’s entourage and in the government. They stressed increased state control of the economy in order to strengthen Ukraine’s independence from Russia and to halt a rapid decline in production. They pursued lax fiscal and monetary policies, in part to prop up state-owned firms, that caused explosive inflation by the end of the year. Yet their desire to control these enterprises and increase revenue to state coffers led them to impose high taxes, triggering complaints from the industrialists.
Kravchuk and then Prime Minister Fokin’s emphasis on safeguarding Ukraine’s independence won them support from part of the former nationalist opposition. A free market reformer from the opposition was included in the government but was soon dismissed when he refused to acquiesce in what he called a “simulation of 962reform.” In November 1992, a new government composed of leaders of Ukrainian industry, led by new Prime Minister Leonid Kuchma, and several economic reformers close to the opposition offered hope that economic reform might get underway in 1993.
