Ukraine’s social order, characterized by limited access, has been an obstacle in the country’s attempts to create democracy and market economy during its entire post-soviet history. Recent Russian military aggression changed the balance of power within the country and opened a window of opportunity for Ukraine to transform itself from a limited access to open access order. Whether Ukraine will use this opportunity depends on relationship between the president and oligarchs.
© Artūras Morozovas

If we regard Ukraine as a limited access social order (North et al, 2009), there is a positive element in Russian aggression against Ukraine. Removal of President Viktor Yanukovych shook the system of rent distribution and power sharing within Ukraine and created a chance to bring the state back in the game. If current leadership takes this opportunity to destroy the old structure, Ukraine has a chance to become a normal state.

Ukraine as a limited access social order

Limited access orders, according to theory, are based on personal relations between ruling elite members (dominant coalition), who have the access to violence, and agree not to use it against each other in exchange of the possibility to share rents. Important element of such social orders – agreement to limit the access of new players to the rent sharing. There should also be a balance of power-capacities and rent-share among those, who form a dominant coalition. As long as those in power can increase their rents by limiting violence, and as long as everyone is satisfied with a possibility to exchange his power-capacity to rents, system may stay stable (North et al, 2009).

Laurynas Jonavičius
Laurynas Jonavičius
© DELFI / Kiril Čachovskij

Looking at Ukraine before the Maidan, we saw all the features of limited access order. There was a dominant coalition of oligarchs, who used political parties, media resources, state and private enterprises and puppet-ministers to exploit Ukrainian state for their personal prosperity and power. At the same time oligarchs provided guarantees of some stability for all the society (by agreeing not to fight large scale and open wars against each other but to suppress and limit the possibilities of any new challengers to question the legitimacy of dominant coalition). Former president Yanukovych and his family, being part of dominant coalition since 2010, at some moment crossed the limit and violated a balance within the dominant coalition. His efforts to grab as much power and resources using opaque legal system, massive corruption and primitive force finally challenged the existing balance of power and ended by a discontent in society and among the other members of dominant coalition. By the decision not to sign the Association Agreement (AA) with the EU in Vilnius, Yanukovych also signed his own death sentence. People went to the streets and overthrew the rising dictator. Discontent with Yanukovych was also informally encouraged by the other members of dominant coalition, dissatisfied with a changing balance of powers. Since a real dominant coalition in limited access order societies is never official and formal, events on February 2014 took form of street protests, not an open fighting between the main centers of power. Of course, Russian and European factors played their role, though in a very specific ways. Russia, which was interested in growing influence of Yanukovych ‘family’, has been perceived as a threat by Yanukovych ‘partners’ within the dominant coalition. On the other hand, Europe, in the shape of AA, threatened interests of Yanukovych (and Russia). Put simply, both external factors was a challenge to existing balance of power and rents and contributed to internal instability. However, internal logic of the system, i.e. limited access order was the main reason behind Ukraine’s current political and economic collapse.

Having said that I do not mean there are obviously good and bad guys in Ukraine, as it is popular to portray pro-Western and pro-Russian forces. In fact, there are only those, who strive for access to power and rent sharing. Usually they just take the opportunity to use the existing circumstances for their own benefit. This is the main explanation, why Ukraine has not been able to move forward with economic and political development and modernization until now. That is why Orange revolution failed. Rules of the limited access order impeded Ukraine’s ability to become a “normal” state first.

This is also the biggest lesson everybody has to learn after the second Maidan and Russian aggression: there has been no state, as we understand it, in the center of Europe. There has been no state, which is normally defined as having an effective monopoly of violence, effective control of its borders and legitimacy, provided by all the population. There has been only a signboard ‘Ukrainian state’, under which private groups there fighting for power and using state institutions to extract rents, not to serve the people of Ukraine. There has been a special – limited access – social order, which facilitated the chaos and was incapable to prevent the violent overthrow of the system.

In fact, the logic of the limited access order lead to the system’s collapse. The only fact that rich persons were able to have private military forces, describes the internal anarchy and zero-sum logic of Ukraine. If we add the situation with so called state enterprises, which did not pay taxes to the central government and were able to resist the legal obligation to pay dividends (exemplary cases of ‘Ukrtransnafta’ and ‘Ukrnafta’), we could see the real face of Ukraine – shared among private owners and exploited by them.

Window of opportunity opened

Russian aggression has been a tragedy, but it opened the window of opportunity for Ukraine to become a real state. Controversy regarding the conflict between president Petro Poroshenko and former Dnipropetrovsk governor Kolomoisky is an interesting illustration of the attempt to define new rules of the game. Arguably, Kolomoisky is to be praised for strong-hand approach defending Dnipropetrovsk from separatists. He personally organized military resistance, financed armed forces and suppressed separatism. However, what has saved Dnipropetrovsk, could have diminish Ukrainian state. Because it is the prerogative of any state, by definition, to guarantee security of its citizens. If someone, led by personal interest, performs these functions, the state is weak if not impotent at all. Events around ‘Ukranfta,’ clearly demonstrated that Kolomoisky was interested in defending the security of his own assets and profits, not those of the state. It may be even claimed that Kolomoisky invested in defense of Dnipropetrovsk to secure his increased influence within the new dominant coalition, which had to be formed after Yanukovych left Ukraine. Tracing the activities of other influential but informal players in Ukraine confirm that hypothesis. For example, Dmytro Firtash, who was associated with the Party of Regions and was a supporter of Yanukovych, after Maidan changed his affiliation and established an ‘Agency for the Modernization of Ukraine’. It may sound patriotic, but knowing the history of D.Firtash’s political and economic career it is merely an attempt to find a place in the new Ukrainian environment, not to strengthen or modernize Ukrainian state (Burkhardt, 2015). Informed sources in Ukraine also say that the same agency has been financed by other former Yanukovych supporters - Akhmetov and Pinchuk (Kommersant, 2015).

Taken together, removal of Yanukovych distorted internal balance of power within the dominant coalition and led to a systemic crisis. There was a need for new balance of power and former dominant coalition members joined the struggle for influence. However, the same removal of Yanukovych opened the window of opportunity for a State to return to political arena. New president Poroshenko was associated with the restoration of state’s power firstly. Challenge for him and for politicians, who have been entrusted to represent the state after the Russian invasion, has been to find a role for State within Ukrainian political, economic and social system. Not to use the State for gaining personal strength, but to make it viable, non-personalized and effective. To put it simple, the future of State in Ukraine is the most important question now. Until recently, State has been abused. Whether it will become a player in itself, remains to be seen.

Breaking the vicious circle

One option for a new political leadership, which requires less efforts and political will, is the return to informal balance of power among few within a new dominant coalition. It is very tempting to President Poroshenko (who is oligarch himself) to use the situation for strengthening his personal position. Political environment is very conducive to do that – strongest competitors (Akhmetov, Firtash, and Medvedchuk) have been discredited for their relations with Yanukovych and Russia.

Ongoing fighting with separatists provided President an opportunity to consolidate control of power in his hands. His remarks that ‘we won't have any governors with their own pocket armed forces’ only confirm that. If this is a choice, Ukraine once again (as it happened after the Orange revolution) will plunge itself into vicious circle of limited access order.

Nevertheless, there is also a second option. The same conditions, which may return Ukraine to oligarchy, can be a source of building a real state of Ukraine, based on open access order. Looking from optimistic perspective, Poroshenko’s decision to dismiss Kolomoisky from the post of the governor of Dnipropetrovsk, as well as his efforts to consolidate the control of violence in state’s hands, restructuring of tax system and state-owned enterprises can lead to consolidation of the State. State, which is capable of enforcing equal rules of the game for everyone, which is able to collect taxes and to distribute them efficiently, which has a continuation through the impersonal organizations and institutions.

First, President and Government has to create and empower impersonal organizations. Not just a Parliament or Government, which are run by oligarchs as it has been until now, but organizations, which would be effective not only because of the good will of oligarchs.

Second, there is an urgent need for centralized and consolidated control of violence. However tempting it may be to praise efficiency of private military forces, their mere existence is an obstacle to effective and impersonal state. Because those, who control them, may fight common external enemy today, but may target guns to political opponents or against the State tomorrow to defend their ‘right’ not to pay taxes. It is also related to the issue of the Western supply of arms to Ukraine - as long as the government does not have a monopoly on violence, no one in the West will risk providing lethal arms. Moreover, it is logical.

Finally, equal, impersonal rules, have to be established. Government should not be a collective of ministers or MPs, who adopt different standards for those who have access to violence and those who has not. Ukraine needs a state, not a dominant coalition of powerful. Ukraine needs a state, who’s effectiveness in controlling violence, enforcement of compliance with a rule of law is not dependent on interests of Akhmetov, Kolomoisky or Poroshenko, but outlives personalities and is based on legitimacy, received from the people of Ukraine. The same applies to political parties, state companies and other institutions – they have to become impersonal and perpetual in way that allows ‘today’s rulers to bind their successor to today’s rules, a necessary condition for the rule of law, for the long-term success of markets, and for stable democracy of representations’ according to North (North et al, 2009).

Bringing the State back is a huge challenge. Bringing the State back in during the war is even a bigger challenge. However, shock of war is positive in a way it allows those, who want to bring State back in, to take drastic measures. It is not impossible that consolidation of the State may require some authoritarian measures. Especially in an environment of fierce competition for resources and power. It is also not impossible that centralized State may turn against competitors and society. In fact, this happened in Russia at the end of the first term of President Putin. Nevertheless, Ukraine desperately needs a strong State now. To stop the conflict and to move forward with real reforms. West should bear that in mind while providing support to Ukraine. West should also be present and active as much as possible – without external monitoring and knowledge Ukrainian chances to drown again in limited access organization of society strongly increases.

References:

North, D.C., Wallis, J.J., Weingast, B.R., 2009. Violence and social orders a conceptual framework for interpreting recorded human history. Cambridge University Press, Cambridge; New York.

North, D.C., Wallis, J.J., Webb, S.B., Weingast, B.R., 2009. Limited Access Orders: Rethinking the Problems of Development and Violence. Unpublished working paper.

Burkhardt, F. (2015) Vying for influence in Ukraine

Cited in Olearchyk, R. (2015) Poroshenko warns rival over "pocket army", The Financial Times, 23 March

Matsarskiy Y. (2015) Бывшие главные олигархи Украины откровенно паникуют [Former dominant Ukrainian oligarchs are in panic], Kommersant, 6 March

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Dr. Laurynas Jonavičius is lecturer at the International Relations and Political Science Institute of Vilnius University

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