The horizon is not so far as we can see, but as far as we can imagine

The Beautiful Stupidity of Ukraine’s Massive Sell-off

So, the Ukraine has a plan.

Kyiv is planning a selloff of more than 3,000 state companies reminiscent of the ’90s rush in Moscow.

If you go read the full article, it’s beautiful, truly. This sell-off is about de-oligarchicization! It is about reducing corruption! Foreigners are flooding in to buy these companies up, but Russians aren’t allowed.

The ’90s Russian sell-off is what created the oligarchs, of course. It was done at the urging of American economists, the idea was to subject the Russian economy to “shock therapy.” Similar to “shock and awe,” it was just as good at impoverishing people.

The Nation wrote about this back in ’98:

Through the late summer and fall of 1991, as the Soviet state fell apart, Harvard Professor Jeffrey Sachs and other Western economists participated in meetings at a dacha outside Moscow where young, pro-Yeltsin reformers planned Russia’s economic and political future. Sachs teamed up with Yegor Gaidar, Yeltsin’s first architect of economic reform, to promote a plan of “shock therapy” to swiftly eliminate most of the price controls and subsidies that had underpinned life for Soviet citizens for decades. Shock therapy produced more shock – not least, hyperinflation that hit 2,500 percent–than therapy.

Economists are ideological shock troops, intent on making the world look like their ideology says it should. They are little different from Communist cadres, except the deaths they inflict are done second-hand: They don’t have the honesty to kill themselves, but just set up “markets” to do the job for them. (Note that the idolized Jeffrey Sachs was the architect of a huge die-off and impoverishment of Russians. A truly despicable man.)

The Ukraine is making the same mistake, again, and the result will be the same, except with a lot more foreign ownership (just not Russian!). This is bad, because local oligarchs are easier to control than international ones, who are protected by much more international law and American sanctions. Russia still has an oligarch problem, to be sure, but it is much less than it was, because Putin was able to effectively threaten them.

If you want to introduce private enterprise into your mostly state run country you do it Chinese style, not Russia/Harvard ’90s style. Anyone with sense knows this, since the records of what happened in the two countries are a matter of public record, and within living memory.

Big uncontrolled sell-offs are bad, sell-offs to foreigners are worse.

Part of this is corruption in drag because a lot of the people involved in the sell-off will get rich; part of it is ideology similar to the Harvard boys’s depraved actions in Russia, and some of it is genuine belief that foreigners are superior to Ukrainians. That seems…unlikely. It’s what the Russians believed in the ’90s -— “Americans have a huge surplus of consumer goods, surely, they will help and teach us to have it too!”

But, as the bitter Russian joke about the late ’90s stated, “Everything the Communists told us about Communism was a lie. Unfortunately, everything they told us about capitalism was true.”

Ukraine will, as a result of this, wind up even worse off. The corruption will be less visible to the extent it is foreign corruption, but will be no less real, and oligarchs who don’t even live in the Ukraine will be no kinder to the Ukraine than oligarchs who do live in it.


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  1. virgil

    So Sachs worked with Yegor Gaidar (Strugatsky) to destroy the Soviet Union.

    Who created the Soviet Union?

  2. Hugh

    “Economists are ideological shock troops, intent on making the world look like…” what the rich and powerful who pay them want.

  3. StewartM

    China is a dystopian surveillance state, and Xi may be a threat to his neighbors (especially Taiwan; in some way Xi reminds me of Wilhelm II of Germany after Bismarck’s dismissal, foolishly abandoning a more restrained (if still evil) policy for one that was more openly aggressive, as Xi is no longer following the “hide your strength, bide your time” policy of his predecessors), and China’s industrialization has helped mightily make the planet’s predicament worse. But China has otherwise done its economic development far more intelligently than anyone else, insisting that foreigners never to control anything that really matters, by placing limits on the percentage a plant operating in China can be owned. As one coworker quipped, “yes, that plant is owned by XXX, inc., partly, but they have to ask permission to enter and give a few days notice before that”. China will thus not allow plants to be shut down by Wall Street geniuses to ship their production to say, Indonesia.

    If China possibly ruling the future alarms you, if you see Xi and China as the bad guys, then it is imperative that whoever you deem to be the “good guys” to start doing things right, instead of keeping on doing things deliberately wrong.

  4. Jason

    Sachs applied Milton Friedman’s Chicago school “economic discipline” to Bolivia – entirely deregulate and enact draconian austerity policies on the population.

    The international bankers made out like bandits as always, even given that they had to “settle” for about 1/10th of what they loaned.

    The story in Bolivia is a familiar one. Jaime Paz Zamora was apparently an early revolutionary back in the 70’s, but in order to gain the autonomy he wanted for Bolivia he had to go to bat for the bankers to some degree. But once started down that road, it’s never enough, and the international bankers wanted to take over the Bolivian military under the guise of fighting the drug trade. Zamora knew where this would lead, but he was being threatened economically by the bankers, so he relented and allowed U.S. Special Forces to train the Bolivian army. This was hugely unpopular with the majority of Bolivians and created massive anti-American feelings, which are then splashed all over the U.S. media to show the perpetually busy and distracted U.S. populace how awful those crazy Bolivians are.

    Sound familiar?

  5. sybil

    Who created the Soviet Union?

    Is there a complete English translation of Solzhenitsyn’s Two Hundred Years Together?

  6. Mark Pontin

    Re. China and its development over the last forty years, this from the latest NLR is relevant and definitely worth a read —

    It’s a review and discussion of a new book called How China Escaped Shock Therapy: The Market Reform Debate, by Isabella Weber

    ‘To illustrate the stakes of market-reform debates in China in the 1980s, Isabella Weber begins her book with some dramatic graphs. The first compares Russian and Chinese shares of world gdp between 1990 and 2017. It shows that Russia’s proportion halved in this period, whereas China’s grew nearly seven-fold.

    ‘This dramatic divergence, Weber argues, was a consequence of the shock-therapy policies carried out in Russia after 1991, starting with the wholesale liberalization of prices. As prescribed by neoliberal economists, the goal was to make the transition from state-socialist to capitalist economy as rapidly as possible … Russia followed this path and saw its economy collapse. Since then, its growth has been uneven, but generally slow. China, however, resisted the prescription and has done much better. The PRC is deeply integrated into global capitalism, yet Weber argues, it has not undergone ‘wholesale assimilation’ or ‘full-fledged institutional convergence’ with neoliberal norms …. The purpose of How China Escaped Shock Therapy is to explain this divergence, which Weber does very well.’

    One thing that becomes apparent is that the Chinese were being entirely pragmatic as they went along and ALMOST went for the kind of Big Bang neoliberalization. They’ve still settled for a shit-load of inequality, as Deng
    finally decided that if the country was going to develop, some people were just inevitably going to get rich first.

    In other news: Jeffrey Sachs these days says he’s really, really sorry and he was wrong, wrong, wrong in the 1990s and knows it now. So that’s all right and I hope the Russians are properly consoled.

  7. Feral Finster

    Even Jeffrey Sachs admits that “shock therapy” capitalism was a disaster.

    But this is simply intended to make Ukraine even more supine and dependent, and I can bet you was something ordered from outside.

  8. different clue

    If the neo nazi coup regime in Banderastan tries selling off public assets in Russophone East Ukraine, the East Ukrainians will fight physically against any foreign taking-possession- of “sold off” “assets” by foreign buyers ( or even West Ukrainian neo-nazi Banderastani-favored oligarchs) .

    They will of course seek assistance from their Russian neighbors in saving their wealth and lands from neo nazi privatization from coup regime Banderastan.

  9. Hugh

    Germany is the largest economy in the EU and many people like to praise Angela Merkel, but the whole eastern tier of the EU is a testament to the really lousy leadership role Germany has played in the EU. When people decry the mess that is Brexit, I agree, but I can’t help thinking being in an economic union with Germany is probably worse. Germany has profited immensely from the EU but its leadership within it has been extremely negative politically and economically. It effectively destroyed Greece in a backdoor ploy to bail out its own banks, and it has done absolutely nothing to ease the banking crises in the EU’s southern tier. It has watched the eastern tier go authoritarian and done nothing, no leadership, no aid. It took in hundreds of thousands of Syrian refugees, but only kept them after failing to dump them on its neighbors.

    The USSR ended 30 years ago. The EU began 28 years ago. My question is why the EU, and in particular Germany its largest economy, have done so little in all that time to stabilize and rationalize the Ukrainian economy. Being a Ukrainian is tough. You’ve got Putin and Russia to the east and an indifferent EU and Germany to the west. Maybe they could turn Chernobyl into a tourist hot spot.

  10. Ché Pasa

    Ukraine’s independence from the USSR came with a buncha oligarchs who bought up everything they could and they have been merrily looting the public — excuse me, sucking up public wealth — for decades. Selling off remaining public assets suggests to me that German bankers want their pound of flesh — don’t they always — and don’t care how they get it. “Anti-corruption” in those regions is usually code for reducing local/national control in favor of control by outside private forces. Like banks. And such.

    We saw what happened to Greece when German bankers decided they weren’t being paid enough by the long-suffering Hellenes. Ukraine has never gotten out of the post-Soviet doldrums, even with the Nazis in charge. No doubt this sell-off is intended to further “Europeanize” Ukraine and save it from the Russian Bear. The German embrace won’t make things better.

  11. Chiron

    I bet all my digital yuan that most of the new Ukraine oligarchs live in Tel Aviv.

  12. Mark Pontin

    Hugh: ‘My question is why the EU, and in particular Germany its largest economy, have done so little in all that time to stabilize and rationalize the Ukrainian economy.’

    Because the big Ukraine sell-off now is ‘rationalization’ and ‘stabilization’ for Ukraine in neoliberal terms.

    And that’s because the EU — and in particular Germany, its largest economy — is neoliberal. Arguably more so than the late, unlamented ‘Washington consensus’ ever was, since the EU was created and structured by neoliberals specifically to promote neoliberal socio-political state structures and regulation, whereas the Washington consensus was more an outgrowth of simple US-centric capitalist imperialism.

  13. Ian Welsh

    Please do not bring Covid discussions into non-Covid threads. All Covid comments deleted.

  14. Synoptocon


  15. Trinity

    “Big uncontrolled sell-offs are bad, sell-offs to foreigners are worse.”

    Let’s be clear who will be worse off, and it isn’t any oligarchs, Russian or otherwise. And “foreign” is so last decade, this is the decade of a global community, one global nation, controlled by a mafia style combination of paid figureheads Politicians and their benefactor stakeholders.

    The sell-off itself isn’t the only problem, and no matter what, the restricted buyers (whoever they are) won’t suffer at all.

    Selling public assets to private investors is right out of the playbook, so a lot of Ukrainians will suffer for many years hence with poor or nonexistent service, lack of any maintenance (routine or emergency), complete lack of consideration for public safety, complete disregard for regulations (or new, “business friendly” friendly regs will be bought and implemented if necessary).

    And all this will be followed by the eventual complete breakdown (due to lack of any maintenance) of whatever asset is up for sale now, but by which time (as money becomes even less valuable than right now) the poorest people will then have to pay to replace it at exorbitant, highly inflated cost, or do without. All the risk is converted to the public, all the profit goes into private hands. Heads they win, tails we lose.

    And all this comes from a recent article about a privatized and mismanaged water facility in Britain, with deliberate releasing of sewage into waterways and the drinking water supply, failing 19th century infrastructure, no maintenance at all, etc. This is why I laugh whenever anyone suggests incompetence or stupidity.

    Their madness and their greed know no bounds. They are not incompetent and they are not stupid. That is what they WANT us to think, so we’ll keep wishing and hoping they will change, while they continue to rob us of everything, including our lives.

  16. Hugh

    Mark, I agree. It just irks me to see Germany get a pass on any and everything happening in Europe. With power, and wealth, comes responsibility, and I often wonder what Europe, not just the EU, would look like if Germany had exercised leadership anytime in the last twenty years.

  17. Mark Pontin

    Germany _is_ exercising leadership, Hugh. Towards ends that benefit Germany, at least as Germans perceive those things.

  18. someofparts

    Years ago Kevin Phillips observed that global wealth was shifting to the eastern hemisphere. I guess that is the process we are observing, nation by nation, region by region.

    The people I live around watch the evening news on the networks and believe every word they hear. They think we saved Russia, and that the Russians now threaten Ukraine.

    Sometimes I wonder if at this point they actually could convince the American viewing public that the moon is made of cheese.

  19. different clue

    @Mark Pontin,

    When the Germans find themselves surrounded by the dried-out terminally mercantalized husks of what used to be European countries, filled with bitter hateful people who used to be Europeans, and who know exactly where the money went; then the Germans may begin to wonder whether their perceptions of ” good for Germany” were really reality-based or not.

  20. Mark Pontin

    @ different clue and Hugh —

    I don’t disagree with either of you. But let me amplify the discussion a little. The fact is, Germany has put itself in a peculiar position in that it’s organized itself around being a 19th century style industrial manufacturing and exporting economic power in a 21st century where there’s a global excess of industrial productive capacity and cheap labor.

    So Germany depends on building and exporting high-priced, theoretically prestige products like Mercedes and BMW autos etc. There’s no way that the rest of the world would buy these ‘prestige’ products — actually just absurdly over-engineered and insanely priced (give me a Toyota or Honda every time for actual value and engineering)) — in the volume that the world does if the Germans had to price them in deutsche marks.

    Priced in Euros, conversely, those German products do become somewhat more affordable. And the Euro’s lower exchange rate (as compared to a deutsche mark that’s no longer around, to be clear) is predicated on the bloc’s overall GDP and, forex, massive youth unemployment of 38 percent or so in Southern European countries like Spain.

    Hence, for the German industrial exporting economy to do as well as it does, it absolutely _needs_ the suppression of the Euro’s value that massive unemployment elsewhere in Europe provides.

    This isn’t even to get into the simple question re. the EU that Mark Blyth raised back in 2015-16: How does the game end when one single nation continually runs trade surpluses of 8 percent while preventing other nations from running spending deficits? Blyth’s answer was simple: when one country’s economy continually grows at the expense of causing other nations’ economies to shrink, it can’t end well.

  21. Mark Pontin

    Hugh: ‘When people decry the mess that is Brexit, I agree….’

    As for Brexit, it’s not all bad —

    ‘U.K. Starting Salaries Increased at a Record Rate in July’
    “The lorry driver shortage is making some companies go to extraordinary lengths to attract employees. Supermarket giant Tesco is offering a £1,000 bonus (about $1,370) to drivers who join before the end of September.”

    Funny what happens when employers can no longer import cheap Eastern European labor to work for as little as a quarter of the going rate in the UK or, alternatively, ship plants to E. Europe.

  22. sybil

    Why Israel’s Best Friend in Congress Doesn’t Think His Party Has an ‘Israel Problem’

    A leading voice on U.S. foreign policy, Rep. Ted Deutch tells Haaretz why he’s still optimistic about a lasting peace in the Middle East, how Judaism informs his politics and why antisemitism must be called out on all sides

    WASHINGTON – Over his 11 years in Congress, Rep. Ted Deutch has become one of Israel’s most important friends in D.C. Chairing the U.S. House Subcommittee on the Middle East, North Africa and Global Counterterrorism and co-chairing the House Bipartisan Task Force for Combating Antisemitism, the Democrat from Florida’s 22nd district holds a near-singular résumé of Jewish-American bona fides.

    “This is really who I am; these are the issues that I care most deeply about. The work that I’ve done in Congress – that doesn’t start with politics. All of that happened because of who I am as a Jew,” Deutch told Haaretz in an interview earlier this week.

  23. Ven

    Interesting thing about Sachs is that he seems to have had a Damascene conversion:

    On keeping Africa poor:

    On BBC anti-China bias vs US:

    On Afghanistan:

  24. Chipper

    Suggestion: you might want to change “kill themselves” to “kill the populace themselves” or similar, since it’s ambiguous as written. Yes, it’s clear from context what is meant, but I stuttered over it, translating it into the suicide meaning on first read.

  25. deplorado

    @Mark Pontin:

    There was a discussion on Weber’s very necessary book just a day or two ago:

  26. elkern

    At first glance, this (privatizing Ukraine’s state-owned companies) is insane. With a little back-checking, it’s even stupider than it looks at first.

    Interesting that the only Google hits I got from “ukraine privatizes state assets” [dated this year] were from The Atlantic Council, and one of them (link below) was written by Sennychencko, who was quoted in the Daily Beast article. It brags that they expect to get $430M from the sale, which adds up to… less than $11 per [Ukranian] person. The second Atlantic Council article I found talks about privatizing Ukraine’s state-owned banks; the news is mostly “bad” – they’re having trouble finding buyers, and in fact Ukraine was “forced to nationalize the country’s largest bank, Privatbank, in order to ensure the stability of the Ukrainian banking sector” in 2016.

    My guess is that they all know that the Ukraine Experiment (peel it away from Russia, turn it into a thriving NATO base?) is failing, so they might as well sell what they can & let if fall apart before letting Russia have it back. Damn them all.

    Atlantic Council Sennychenko article:

    Bank privatization article:

  27. KK


    > My question is why the EU, and in particular Germany its largest economy, have done so little in all that time to stabilize and rationalize the Ukrainian economy.

    Maybe it is because Ukraine is such a bottomless money pit. (West) Germans paid for the stabilization and rationalization of East Germany. I understand it basically cost them an arm and a leg, so to speak. I think they have had enough of “stabilizing and rationalizing”. What you call “stabilizing and rationalizing” looks to Germans more like indulging lazy bums.

    If you think stabilizing and rationalizing is so easy, why has the US done so little in all that time to stabilize and rationalize Haiti? Ukraine is the Haiti of Europe.


    > they expect to get $430M from the sale

    this is because the best, desirable parts of Ukrainian economy have already been privatized long time ago. Only the crap that local oligarchs did not want is left over, and is being peddled to western suckers now.

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