Neoliberal Colonialism

Wounded fighting Russia. Ukraine, April 2017.

Wounded fighting Russia. Ukraine, April 2017.

While Russia sought to hold on to its sphere of influence by creating the Eurasian Economic Union, the more dynamic and highly developed European bloc had long been on an expansionary trajectory. Expanding, after all, is what capital does.

Thomas Piketty recently cited research detailing the extent to which European capital profited from its Eastern expansion: “Western investors (especially Germans) have gradually become the owners of a considerable proportion of the capital of the ex-Eastern European countries.” A quarter of the complete stock of fixed capital and over half of all firms are owned by investors. “Between 2010 and 2016, the annual outflow of profits and incomes from property…. represented on average 4.7% of the gross domestic product in Poland, 7.2% in Hungary, 7.6% in the Czech Republic and 4.2% in Slovakia, reducing commensurately the national income of these countries.”

Another boon of Eastern expansion to the economies of the core was the ability to tap the East’s immense reservoir of cheap labour for central European industry, either through migration or eastward relocation of production. Seen from this perspective, Ukraine – with its extremely low standard of living, but industrial legacy – would be the perfect candidate for organising the further expansion of European industry, and for preventing rising labour costs of cutting into the margins of German manufacturing. Already now, estimates the boosterish newly founded German-Ukrainian chamber of commerce, over 30, 000 Ukrainians are employed in Western Ukraine for the German automotive component industry. And over a million Ukrainian migrant workers, their number carefully regulated to meet the Polish labour market’s needs, are helping to keep labour costs low despite the booming Polish economy.

The former Soviet state did not go West willingly. When Viktor Yanukovych took power in 2010,Yuliya Yurchenko argues, “Ukraine’s economy was witnessing both political and economic inward reorientation movement.” Triumphant, “the last obstacles to concentration of power and capital in the hands of Donetsk capital were removed (…) (and) the ‘black holes’ in Ukraine’s economy used for oligarchic enrichment could be further expanded”. Yulia Tymoshenko and Yuriy Lutsenko went to jail; negotiations with the EU, IMF, and USA began to go sour, and the energy sector was fully privatised into Donetsk hands. This period was characterised by “continuous attacks on human rights and freedoms (…) and the carving of legislation to serve the interests of the oligarchic capital. On the level of class fraction rivalry, a gradual takeover of competing political and economic forces has been occurring by political prosecution and imprisonment of opposition leaders (…), administrative pressure, and murder.”

But at the same time, an ongoing lack of development, the heavy impact of the global financial crisis, and the existential dependency of the economy on IMF loans and on below-market-priced energy from Russia made this state of affairs unsustainable – and Ukraine heavily susceptible to political pressure both from both the West and the East, thus setting the stage for the 2013 political crisis.

Between the Two Association Agreements

The EU offered what it could offer: access to its market, fierce competitive pressure potentially forcing Ukrainian businesses to modernise, IMF loans and development aid to prevent complete economic destitution – and the possibility to emigrate, of course, which has already emptied out the Baltic states and much of Eastern Europe, but in the Ukrainian case still remains heavily regulated. The potential long-term benefits of EU association are undeniable, however: it opens access to one of the largest and deepest markets in the world. The Eurasian Union’s annual turnover does not even compare.

However, without a strong industrial policy, in the short and medium-term going head-to-head with highly competitive European businesses would have imposed painful adjustments on the Ukrainian economy. While most of Ukraine’s business owners, Yurchenko documents, supported European association, albeit reservedly, this may also have been driven by their fears that a definitive annexation to the Russia-dominated economic sphere would have made them vulnerable to ‘competition’ by the more powerful, and predatory, Russian oligarchic capital. Competition with European capital, this suggests, would obviously also be brutal, but only in an economic sense.

Since Russia was explicit in its threat to punish any state willing to associate with the EU by excluding them from the Eurasian Economic Union, thus forcing them, as was the case with Moldova, to trade with Russia and Belarus under the same conditions as all other WTO members, the stage was set for a decisive showdown.

While Yurchenko is strong in her critique of the European Union Association Agreement, even calling Yanukovych’s rejection of it “one of the few things (he) got right,” she is even fiercer in condemning the Russian aggression of 2014. Driven by “Russian capitalist imperialist ambitions to ‘defend its interests’ at any cost’” as she puts it, Russia not only intervened militarily, it also made good on its promises to punish wayward Ukraine through trade restrictions and a normalisation of gas prices. EU exports were in no way able to replace the collapse of Ukraine’s traditional economic ties with Russia. The war further worsened the crisis. The resulting economic collapse that began in 2014, and from which the country is still reeling, was truly staggering: GDP/capita fell 28.1% in from 2014 to 2015, and 23.9% from 2013 to 2014, while the currency lost dramatically in value.

Only infusions of Western credit prevented a further collapse, fixing the new government on a track of harsh neoliberal reform and austerity policies. Since its independence, Ukraine borrowed $44 billion and €15.6 billion total. Any government this way had been subject to disciplining by the donor apparatus, and the prescriptions of the IMF, World Bank, and EU – all the more so since the alternative source of funding from Russia has dried up for the foreseeable future.

Yurchenko conceptualises the current, post-Maidan configuration as a “neoliberal kleptocracy”: on the one hand, the kleptocratic oligarchical powers have survived the popular revolt and managed to remain on top. The destabilising and threatening atmosphere of the war, which stoked “popular fears of (a) power vacuum”, came to their aid in 2014, and a return to political oppression and manipulation further stabilised their position. In particular, Yurchenko argues, the instrumentalising of right-wing rhetoric and nationalist fervour has bolstered popular support for the elites.

On the other hand, debt dependency and the slow but sure integration into the structures of the European market continue to enforce a neoliberal reform program. The ruling interests have been happy to cooperate with parts of it, striking gas price subsidies, privatising businesses and the medical sector, but increasingly stalled when it came to giving up control over the domestic economy, the state, and the judicial system.

Conflict between the Western powers pushing for ‘anti-corruption’-measures, and a kleptocratic elite wary of being subjected to rules not of their own making, have in recent months led to a souring of the IMF-Ukrainian relationship – a development which Yurchenko already anticipated. The underlying conflicts which still structure Ukrainian politics today, she writes, “are the class formation and accumulation struggles between foreign and domestic capital, that is, oligarchs, the EU, the USA, and their indirect engagement in Ukraine’s policymaking via various forms of advisory and financial ‘support”.

While foreign and domestic capital may have their differences, they nonetheless cooperate in the common neoliberal project of depoliticisation. What makes neoliberal kleptocracy neoliberal, Yurchenko argues, is the disarmament of the demos, the “political disempowerment of the voter (…) combined with their economic disempowerment and the ideological hollowing out of political discourse.”

Oligarchic rule remains based on the systematic powerlessness of the Ukrainian population. This disempowerment, argues Yurchenko, “is manifest in the crisis of representation that stems from the declarative nature of Ukraine’s party programmes and politics, which led to a general lack of trust in politicians and voter apathy. The latter is being ‘resolved’ through voter bribing that, in conditions of economic deprivation, is relatively cheap and easily achievable”.

The professional staging of “virtual politics” has always been dependent on the control of public opinion through a subjugated media sphere and competing attempts at information control. The advent of social media has merely complicated, not resolved this untenable situation.

It is hard to see any light at the end of the Ukrainian tunnel. Yurchenko reflects this in expressive, almost apocalyptic language which at some points breaks through the abstract jargon of international political economy. About Ukraine’s immediate prospects, for example, she writes:

“Crimea is not likely to be returned peacefully soon; nor is the Donbas conflict likely to be reconciled in the immediate future. What is certain is that authoritarian fascisising neoliberal kleptocracy is increasingly dispossessing and alienating the country’s labour beyond the limits of the possible that are necessary for everyday social reproduction. As even the so-called ‘right-wing patriots’ are being disposed of as the enemies of the system in Poroshenko’s address to the parliament this September, social discontent is brewing stronger. This dispossessed labour force is awake; it is aching from the freshly inflicted wounds and covered in the blood of its children; it is armed; and it is desperate. It is pregnant with the next Maidan.”

Yurchenko closes the book with another dark warning: The second Maidan, she insists, “has not brought the change that many have already died for, yet it was only the beginning, not the end of the dispossessed fighting back. Ukraine is pregnant with the next, more violent Maidan”.

At least so far, however, apathy, war-induced resignation, and still remnant hopes in the reform process have triumphed in keeping the lid on things. But the situation is far from stable. While living standards have dramatically plummeted in recent years, and are only now stabilising, even the oligarchical class, in the larger scheme of things, is not triumphing. The Ukrainian oligarchs may be able to funnel their wealth offshore, send their children to foreign schools, and enjoy visa-free travel into Europe. But they rule over a stagnating, politically desolate and unstable fiefdom. As a class, they are neither large nor powerful, and certainly they are not united. By Western or Asian standards, they aren’t even that rich.

With the ruling interests of Ukraine unable to produce a political form of its class rule powerful enough to discipline their own plundering and guaranteeing a functioning mode of accumulation, Western-directed neoliberal transformation seems elusive. Perhaps Yurchenko is right, and another Maidan is only a question of time. With a ruling class so patently unfit to rule, it does not seem impossible.

However, Yurchenko suggests that like the previous one, such a revolt would lack a positive class content. In the protests of 2013/14, she argues, there was “no class in-itself or for-itself in a historical materialist meaning of the term”. There was outrage and revolt, but when the dust settled, the previously established class formation in collaboration with its foreign pay-masters was still running the show.

If there is hope in Yurchenko’s conclusions, it is in the quiet indifference she observes among ordinary people to the deathly polarisation, to the proto-fascist separatist propaganda and state-directed nationalist fervour equally, which would have the potential to rip less level-headed nations apart.

“When the country’s right to exist, its sovereignty, separateness and individuality are brought into question, and its political sovereignty are being negated on the basis of that questioning,” she writes, “little room is left for cosmopolitan reckoning. Yet it remains in the praxis of the everyday. End even at the frontline checkpoints, people speak both Russian and Ukrainian, crossing back and forth every day, welcome their friends and relatives in their lives as they did before, defying the radicalised minority’s vision of animosity that has remained the minority’s vision.”

Photograph courtesy of the Ministry of Defence of Ukraine. Published under a Creative Commons license.