How Ukraine Became a Market Economy and Democracy
The 1991-2008 transition; explains where the industrial assets came from.
Summary
Anders Aslund advised the Ukrainian government in the 1990s and writes here as both analyst and participant. The book covers Ukraine from independence in 1991 through the Orange Revolution and its aftermath, arguing that the country eventually reached a market economy and an electoral democracy despite one of the worst starting records in the postcommunist group.
Aslund's account of the 1990s is severe. Ukraine delayed price liberalisation and stabilisation, ran hyperinflation through 1993, and produced an output collapse deeper and longer than Russia's. He attributes this to a parliament dominated by state enterprise directors and to the rents available from subsidised energy imports and export licensing. The stabilisation of 1994 to 1996 under Kuchma and the introduction of the hryvnia mark the turn in his narrative, followed by the reform government of Viktor Yushchenko in 2000 and the rapid growth of 2000 to 2008.
The book's optimism has not aged well, and Aslund himself revisited the subject in 2015 with a much more critical assessment. The oligarchic capture he describes as receding proved durable, and the institutional weaknesses he treats as residual proved central. Read it for the detailed reconstruction of Ukrainian macroeconomic policy in the 1990s, which is the best available in English, and treat the concluding judgement as a position later revised by its own author.
Key takeaways 7
- Ukraine's delay in liberalising prices and stabilising the budget caused an output collapse deeper than Russia's, not shallower.
- Subsidised energy imports and export licences created the rents that funded the first generation of Ukrainian oligarchs.
- Hyperinflation ended in Ukraine only when the parliamentary coalition that benefited from subsidised credit lost control of monetary policy.
- The introduction of the hryvnia in 1996 succeeded because it followed fiscal correction rather than substituting for it.
- Aslund argues that Ukraine's oligarchs eventually supported market reform because they needed secure property rights to protect what they had taken.
- Democratic competition in Ukraine survived because no single group could dominate, which Aslund treats as a benefit of oligarchic pluralism.
- Growth from 2000 to 2008 came from capacity utilisation and terms of trade in steel rather than from new investment.
Who should read it
Analysts of postcommunist transition and of Ukraine specifically who want a detailed policy history of the 1990s, read alongside the author's later and darker reassessment.
Where it sits in the reference 2
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