Happy New Year!

A year of 2009 was full of major political and economic events for Ukraine. On the negative side, Ukraine's economy experienced a deep economic recession while Ukraine's government gridlocked in an intensifying brawl between President Yushchenko and Prime Minister Yulia Tymoshenko. The upcoming 2010 Presidential Election only worsened a situation with governance efficiency (e.g. a phantom outbreak of swine flu, new price controls, chocking a private sector development, etc.). Furthermore, Ukraine's foreign affairs with Russia reached a new boiling point while the Western Europe cooled its enthusiasm about Ukraine's potential membership in both NATO and EU. On a bright side, Ukraine's four major cities received an approval from UEFA to co-host the European soccer championship EURO 2012 with a final in Kyiv. Btw, it shows that a private sector can strengthen a national reputation if it is left alone from the government mess. And on this note, let me say that I'll return to blogging in a new year of 2010. A month of January promises to be a very exciting because a first round of the 2010 Presidential Election will be held on January 17^th.

Happy Holidays! Happy New Year!

 

Gift Ideas for Winter Holidays!

Ukrainians say that a good book is the best gift ever. You can gift it to someone or you can always gift it to yourself and later gift it to someone else. J Then a good question will be: "Is there anything to read about Ukraine, Russia, and Eastern Europe?" I can recommend a couple of books for both intellectually stimulating and leisure reading.

Let's start with intellectually stimulating books:

1. Awesome book about History of Ukraine by Orest Subtelny.
   
2. State-Building by Verena Fritz
   
3. Russia's Capitalist Revolution by Anders Aslund
   
4. The Strategy of Campaigning by Skinner, Kudelia, de Mesquita and Condolezza Rice
   
5. How Ukraine Became a Market Economy and Democracy by Anders Aslund
   
6. Calculation and Coordination by Peter Boettke
   
7. Media, Democracy, and Freedom by Marta Dyczok
   

Now leisure reading:

1. Always #1 is Everything is Illuminated. Or you can watch a movie. Since I mentioned movies, you should really watch Eastern Promises. This movie is the best foreign depiction of the Russian underworld.
   
2. The Geography of Bliss by Eric Weiner. It's very funny.
   

I also recommend reading these books from George Mason University's faculty. These books are not about Ukraine and Eastern Europe, but these books are really good for everyone who interested in understanding economics.

1. Challenging Institutional Analysis and Development by Peter Boettke and Paul Aligica

2. The Invisible Hook by Peter Leeson

3. Media, Development and Institutional Change by Peter Leeson and Chris Coyne

 

If you want to recommend other books, please feel free.

Happy New Year!

Ukraine’s Traffic Police Can’t Have Favorites

Ukraine's best soccer player, Andrei Shevchenko, got into car accident couple weeks ago in a downtown of Kyiv, Ukraine's capital. Here is a video clip provided by Ukraine's TSN news from TV Chanel 1+1. Andrei's Porsche Panamera Turbo crashed into Honda SUV. As you can see on a video, a car accident is not very serious. Nobody got hurt. Both cars got lightly dented and scratched. Mr. Shevchenko told TSN news that a woman who was behind a steering wheel of Honda suddenly changed lanes without turning a blinker on. So he couldn't do a lot to avoid the crash.

What's interesting about this news report is that Mr. Shevchenko despite his mega-celebrity status in Ukraine presents himself as a down-to-earth person. He has no problems talking to a woman whose car he crashed into. Mr. Shevchenko also seems to be very easy-going with cops. It's funny when this woman asks Andrei: "So what's gonna be next?". And he says that they need to exchange their insurances and sign the protocol. Once again, Andrei's behavior is very far from what someone could expect from a mega celebrity. Moreover, it's impressive to see how cops do their work while they certainly go crazy inside because they can see their Soccer God just in a few feet away. The whole news report is very cool and makes you ponder on an efficiency of law and enforcement in Ukraine. Perhaps, a rule of law is not so bad in Ukraine that even Ukraine's biggest soccer star can't avoid a police report.

Btw, Andrei started in FC Dynamo Kyiv in the 1990s and his excellent goal-scoring skills were spotted by AC Milan's recruiters. He had several excellent seasons with AC Milan in Italy and later he played for London's FC Chelsea. Now he is finishing his career by playing for FC Dynamo Kyiv again.

Merry Christmas!!!

The Russian Baths Are Good For Business

Yes, the Russian baths are good for business. Did you know that? If not, then keep it in mind next time when you have a business trip to Ukraine or Russia. Here is why the Russian baths are good for a business.

A dismal science, as economics is often referred to, often focuses on two basic mechanism of human behavior - signaling and screening. For instance, your resume serves as a platform for both signaling and screening. As a job seeker, you use a resume to signal your quality to a potential employer. If you are an employer, you use an applicant's resume to screen for his or her qualifications. Both signaling and screening offer a cost-effective way of match-making in the job market. These concepts can also be applied to other aspects of human lives. Think about dating!

But we live in a world of imperfect information so it can be difficult to get a perfect match each time. So both signaling and screening are also associated with a couple of side-effects such as moral hazard and adverse selection. In other words, you always risk of running into a wolf under a sheep's skin that is a so-called "ship-skin effect" popularized by the labor economists and vice versa. So you got the point. Now let's talk about the Russian baths!

In my undergrad (i.e. in Ukraine) I had a professor who taught Principles of Investment Banking. He was actually one of the first investment bankers in Ukraine. And I remember him complaining a lot about spending 90% of his time in the Russian baths. He said that it helped to check a credibility of their investors. I had no clue what he talked about. I just thought that doing business in a sauna was a fashionable trend in the 1990s.

Well, a sauna has obvious health-related attractions. It improves your immune system and clears your pores. All nations use the same concept of sweat lodge while they just call it different names: the Turkish baths, the Korean baths, the Finnish sauna, and the Russian baths. But it seems that the Russian baths also provided a unique platform for signaling and screening for entrepreneurs in the former Soviet countries, such as Russia and Ukraine, in the tumultuous 1990s.

How did it work? Well, it's easier to picture this if you've seen a movie Eastern Promises staring Vigo Mortensen as a Russian mobster. Russian or Ukrainian (i.e. post-Soviet) gangsters have a very distinctive subculture of prisoner's tattoos. These tattoos are very informative. They can tell a whole life path of a gangster starting from his first incarceration and up to a present moment. A tattoo that pictures Eastern Orthodox Christian church usually tells you how long a gangster was in prison. A tattoo of a cougar on a shoulder will tell you that you are facing a criminal who was in prison for a robbery and assault. Other tattoos can tell you a rank of a gangster in a hierarchy of underworld (i.e. wise guy or made), his responsibilities in a gang (i.e. con artist or racketeer), his criminal record, his religion, his ethnicity, etc. If the Russian mafia can be proud of something, its subculture of prisoner's tattoos must be a source of its pride.

A main goal of the prisoner's tattoo is to introduce a gangster without much to say. Talk is cheap, right? But who would think that the Russian businessmen could utilize the knowledge of prisoner's tattoo as an effective mechanism of screening and signaling. Since it was impossible to have a proper credit check in the sketchy 1990s, the potential business partners would have a meeting in a sauna where you would be almost naked. Do you see where I am getting? If you had prisoner's tattoos, you could not hide them. Of course, the meeting would require a presence of an expert in prisoner's tattoos who could be either a cop or a gangster. Once you've gone to the Russian bath, the credit check is done. Was it cost-effective? Hell, yes.

What about signaling? Ceteris paribus, a businessman needed to collect a debt from his irresponsible business partner in the shady 1990s. Then he would hire so-called "debt-coll ecting agents" who would invite a debtor to the Russian baths. A debtor who would see the prisoner's tattoos of the debt-collectors in a sauna would be more eager to pay back his debt. Here's ECON 101 for Russia, Ukraine and other former Soviet countries in the early 1990s. Do you still think that economics is a dismal science? Think about it next time when you have a visit to the Finnish sauna or the Russian baths.

From UkraineWatch

 

Ukraine’s Government Begs the IMF for Help

The IMF gave Ukraine $16.4 billion in the beginning of 2009. But Ukraine got only $11 billion before the IMF got fed up with a political mess in the Ukrainian parliament and government spending unleashed by the Tymoshenko government. President Yushchenko made things worse when he sent the Minimum Wage Bill to the floor of Ukraine's parliament. However, Ukraine's president can only propose a bill while its destiny solely depends on a will of a whimsy parliament. Of course, the minimum wage bill got stock in the parliament because the Tymoshenko government directed all its attention to fighting the phantom outbreak of swine flu in Ukraine. Now we all know what kind of outbreak it was (see previous posts).

This week the Tymoshenko government sent its representatives, including two Deputy Ministers of Finance, Ihor Umanskiy and Anatoliy Myarkovsiy, to the IMF in Washington, D.C., USA. Now Ukraine's government asks just for two billion dollars from the rest of the frozen IMF loan. I have a very obvious question: What for? The government received $11 billion earlier this year and where did it go? Ukraine's president Viktor Yushchenko asks prime-minister Yulia Tymoshenko the same question. The Ukrainian economy still experiences the deepest recession among other FSU countries. What's going on with the government accountability in Ukraine? In the meantime, a date of the first round of the 2010 Presidential election is approaching.

 

Do You Want to Know More about Nobel Prize-winning Economist – Professor Elinor Ostrom?

Your answer must be "Yes, I do". Then you should read this book Challenging Institutional Analysis and Development: The Bloomington School written by George Mason University's Professor Peter Boettke and the Mercatus Center's Senior Research Fellow Paul Aligica.

This book explores the Bloomington School of Institutional Analysis and Development (IAD) represented by a couple of outstanding scholars – Vincent and Elinor Ostrom. The name of the Bloomington School comes from its geographical location because both Vincent and Elinor Ostrom are associated with the Indiana University at Bloomington. Professor Boettke and Professor Aligica write that the truly distinctive and unique nature of the Bloomington School has been misunderstood because of its association with a mainstream rational-choice research. The Bloomington School has its own style of scientific inquiry that mixes both fundamental economic and political studies with applied research. For instance, Professor Elinor Ostrom's seminal book Governing the Commons shows how a thorough field work can help a scientist in answering the most fundamental economic issues such as coordination, cooperation, and rationality. An innovative approach to a scientific inquiry made the Bloomington School become one of the most dynamic and world-known centers of the New Institutional Theory movement. The Bloomington School of IAD offers not only innovative but also groundbreaking concepts and theory within its broader philosophy of scientific inquiry. That's why Peter Boettke and Paul Aligica focus on the scientific dimensions of the IAD research system. Their book presents a systematic analysis of the Bloomington School by explaining its basic assumptions, its main themes, and its main methodology.

I recommend this book not only to students and social science scholars but also to the international development community. It's a must-read book!

Eastern Europe’s Love Triangle: NATO, Russia and Ukraine

The Foreign Policy's Simon Shuster has a really good piece about a relationship between Ukraine and NATO. In brief, Mr. Shuster writes that, despite Ukraine's decade-long efforts to join NATO, Russia and NATO seem to get closer while leaving Ukraine aside.

Here is a great quote:

"At the Bucharest summit, even if Ukraine had had Britain's democracy, Germany's economy, and America's army, they would still not let us in, because for [Russia] it was too early," says Anatoliy Grytsenko, head of the Ukrainian parliament's defense committee and a former defense minister. "Russia's voice today is not exactly a veto on NATO decisions, but it is a deciding factor for some of the key members of the alliance."

Fact of the Day

According to the Pocket World in Figures (2010) published by the Economist, the former Soviet countries have the highest number of deaths from cardiovascular disease per 100,000 people in the world:

Rank# Country N of deaths

1. Turkmenistan 844
   
2. Tajikistan 753
   
3. Kazakhstan 713
   
4. Afghanistan 706
   
5. Russia 688
   
6. Uzbekistan 663
   
7. Ukraine 637
   
8. Moldova 619
   
9. Azerbaijan 613
   
10. Kyrgyzstan 602
    
11. Belarus 592
    
12. Georgia 584
    
13. Somalia 580
    
14. Egypt 560
    
15. Bulgaria 554
    

    
     

 

Assorted Links: Ukraine’s Phantom Outbreak of Swine Flu

Ukraine's short history of political campaigns has seen a lot. But political and economic events surrounding a phantom outbreak of swine flu shocked not only Ukrainians but also the rest of the world.

A free-lance journalist Julia Ioffe has an excellent piece in the Foreign Policy with a great quote from Taras Berezovets, a senior campaign adviser for Ukraine's prime-minister Yulia Tymoshenko:

"We had to create a phantom and then have a white knight riding in to save the day," Taras Berezovets, a senior campaign advisor for Tymoshenko's BYuT bloc, told me (Julia Ioffe) in a Kiev restaurant, confirming widespread suspicions among Ukrainian journalists. According to a campaign adviser to Yulia Tymoshenko, the Ukrainian prime minister who is also a presidential candidate purposely inflated fears of an ongoing swine-flu epidemic to aid her presidential run."

The Washington Post's Philip Pan has another great article about idiocracy surrounding H1N1 outbreak in Ukraine.

Finally, the Slate's Anne Applebaum discusses a chain of events emerged in a response to Ukraine's panicking about the phantom outbreak of swine flu.

Russia has the Highest Rate of Fraud in the World

EU-Reporter's Gary Cartwright has a great post about fraud and corruption in Russia.

Here is a great quote:

A recent survey by PricewaterhouseCoopers suggests that the country has the highest level of fraud anywhere in the world. Some 71 per cent of respondents said they had been fraud victims in the last 12 months alone, a 12 per cent rise from the company's last survey, conducted in 2007.

Another great quote:

Transparency International was only slightly less scathing on Russia's corruption record, placing the country 146 out of 180 - on a par with Sierra Leone.

Face Mask and Price Control: Ukraine’s Government Fights off H1N1 Virus

Over the last two weeks, Ukraine's Prime Minister Tymoshenko provided a classic example about when price controls and government misinformation could go awry. The government spread panic among Ukrainians by announcing that the country had an outbreak of swine flu in the Western regions. It stated that soon enough the whole nation would be infected with the epidemic and deadly swine flu. In all major TV channels, prime minister told the nation that "the world sent the second greatest trial, after the global financial crisis, to Ukraine and that the nation was not ready to cope with the new disaster". Even Ukraine's president Yushchenko who usually avoids populist decisions wobbled under political pressure and asked for emergency financial and medical aid from the European Union and other countries. In another televised address to the nation, the prime minister announced a three-week recess in schools and universities. The government also banned any public gatherings during the same time period.

From UkraineWatch

Can you guess what happened next to a demand for all medical supplies that could somehow help to fight off the imminent virus? The demand for medicals supplies simply skyrocketed. Shelves of local pharmacies were emptied within two days. Ukrainians bought everything starting from face masks to herbal supplements to flu medications. The price of face masks went up three times across the country until it became impossible to find it in the stores. Some small-scale apparel producers quickly added a new production line to meet the surge in demand. Several boutique stores even tried to add chick to the dismal face masks by putting funky designs on them including a happy face. The government officials, that caused the panic in the market in the first place, responded with an old-school approach by imposing price controls on all necessary medical supplies and face masks. Ukraine's government even went further by threatening entrepreneurs with arrests if they try to make an extra buck on the "swine flu panic". The Leviathan of the Ukrainian government was unleashed. All imaginable regulatory agencies ranging from anti-trust agents to fire-control inspectors swamped local pharmacies and markets to enforce this crazy edict. Subsequently, many privately-owned pharmacies cut down their working hours and even shut down in order to avoid conflict with ravaging regulatory agencies. Even black-market entrepreneurs scaled down their operations to avoid any interaction with law enforcement. Could you guess what happened next? The anti-market behavior of the Ukrainian government proved the law of unintended consequences once again when all medical supplies vanished almost overnight.

Unfortunately, the story does not end there. When fidgety consumers faced the empty shelves in the pharmacies, they retreated to all kinds of substitute goods. Traditional Ukrainian medicine prescribes garlic, onion, and lemon to combat the cold. The demand for these goods rose and their prices doubled. In Kharkiv, the second largest city of Ukraine, the price of garlic skyrocketed from 5 hryvnia per bundle to 55 hryvnia (approximately, 7 USD). The government stepped in again. The government accused retailers of making windfall profits on the virus outbreak. However, a public outrage spurred by several public whistleblowers such as Ukraine's celebrity doctor Dr. Komarovksy made the government back away from another price control. The World Health Organization made an official statement saying that Ukraine did not have a very serious H1N1 outbreak. The government rushed to announce that its "quarantine measures" prevented the outbreak of swine flu. Indeed, everything seems to be back to normal though it is still hard to find lemons in the grocery stores. Many Ukrainians also wonder what they should do with the surplus of home medical supplies. Everyone seems to realize the government caused the panic in the markets in the first place by misinformation, and then they try to correct the markets by using anti-market policy instruments. And you know what happened.

Thus, after two decades of post-socialist development Ukraine's government seems to misunderstand its role in a market economy. Sequences of policy lapses like these represent the importance of understanding basic economics, the law of unintended consequences, and resisting populist pressures. Otherwise, the government hurts its own people instead of protecting them.

Misinforming a General Public Always Backfires

"The Daily Show" host Jon Stewart pointed out inconsistencies in alternating "Hannity Show" shots of a recent conservative rally on the steps of the Capitol Building in Washington, D.C. This has led to accusations of Fox News splicing video footage shot at a larger Glenn Beck rally held in Washington two months ago with video shot at last week's rally, thus falsifying footage to make the more recent protest appear bigger than it was. In other words, the Fox News got caught and made fun of. The lesson is learned once again – don't misinform general public. Speaking of which, so what's really going on with "the pandemic swine flu" in Ukraine? Btw, Ukraine's Ministry of Health prefers to call it the Californian flu.

Here is a video from the Daily Show.

Assorted Links

KyivPost has a very interesting article about who stands behind the major Ukrainian politicians in the upcoming presidential elections:

A lot of money gets raised, made and spent during elections. In Ukraine, with an election law that does not cap spending by candidates, major campaigns are expected to cost from $60-$70 million in the case of former Verkhovna Rada speaker Arseniy Yatseniuk and up to $100-$150 million or more for the two front-runners, ex-prime minister Victor Yanukovych and Yulia Tymoshenko, Ukraine's current premier.

Swine Flu Infects Ukraine’s Politics

It's been in the news since last week that Ukraine has an outbreak of swine flu aka H1N1. Russia, Poland and other neighboring countries overreacted by limiting entrance of Ukrainians across borders. Ukrainian politicians overreacted even more than their foreign peers. Whether the outbreak of swine flu had place, the whole governance system simply folded under exigent circumstances as a house of cards touched by a slight breeze. Politicians did everything what they should not do. Instead of protecting its citizens, the Ukrainian government spread panic and fear among the public.

From UkraineWatch

First, it is very interesting that the government was solely responsible for a panic among the public. The Ukrainian government misinformed citizens about H1N1 outbreak. The World Health Organization says that there was no outbreak of swine flu in Ukraine. The government spread a panic among population when Prime Minister Tymoshenko and the Health Minister announced that Ukraine's Ministry of Health registered a record number of people infected with swine flu somewhere in Western Ukraine. However, the World Health Organization has not confirmed an outbreak of swine flu in Ukraine yet! Moreover, a number of deaths from pneumonia that is a complication of seasonal flu was very far from a critical level. Since "the outbreak of H1N1 flu" (October 29, 2009) Ukraine that is a nation with 46 million people has lost 213 people from pneumonia. Only six cases of the H1N1 infection were confirmed. Several medical doctors have already criticized the Tymoshenko government for misinterpreting data and misinforming the public. The most adamant critic of the government incompetence is Dr. Komarovsky who went on several TV shows to calm down Ukrainians and dissolve a myth about the H1N1 outbreak. The government has already changed its position on the epidemic H1N1 situation by announcing that its preventive measures have already reduced the number of flue infections at least by a factor of four.

Second, instead of H1N1 outbreak, we witnessed, perhaps, a final break in the Orange coalition. When Ukraine's president Yushchenko rushed to ask for medical supplies from Europe in order to fight the nonexistent epidemic swine flu, Ukraine's prime minister Tymoshenko ridiculed him for relying on foreign aid instead of doing something himself. Mrs. Tymoshenko promised Ukrainians that she would provide masks for free at each mobile office of her party across country. President Yushchenko retaliated by filing a law suit to the Supreme Court against the Tymoshenko government for failing to report data on a spread of seasonal flu and holding public rallies during "the outbreak of H1N1 virus".

Third, Mrs. Tymoshenko blatantly used "a fight with swine flu" for the sake of her presidential campaign. She proclaimed a fight with swine flu "the second great trial given by the world to Ukraine after the world financial crisis". She made it clear that H1N1 "outbreak" is her number 1 priority in the ongoing presidential campaign. Mrs. Tymoshenko went to war with the swine flu with such zeal and vigor as Miguel de Cervantes' heroic knight Don Quixote who rode his horse to fight windmills. I guess the WHO officials were really touched by the brave heart of Mrs. Tymoshenko that they reconsidered the status of H1N1 in Ukraine to "assumed outbreak". WOW! Well, it's hard to blame the WHO for still being shy when only six person died with a confirmed H1N1 virus from 250,000 "assumed" infected in a country with 46 million people. I am not a doctor, but it doesn't even look to me as a potential outbreak.

Why and what happened to Ukraine's government? I don't really know. But "H1N1 outbreak" shows once again a "professionalism" of Ukrainian politicians. The "outbreak" also demonstrates that what government can do when it is a group of incompetent self-interested individuals delegated with executive and legislative power and driven by the electoral campaign. This kind of government can't do anything good!

Swine Flu Causes Outbreak of Political Stupidity in Ukraine

Dr. Yevhen Komarovsky, M.D., has an excellent OP-ED in Ukraine's leading English language newspaper Kyiv Post. Dr. Komarovksy not only refutes a myth about H1N1 outbreak in Ukraine but also ridicules a political incompetence of the Ukrainian government.

Here is an example of how efficient is a centralized system of governance in Ukraine:

"I recently talked to a nurse working in a public hospital. She received a call from a chief of medicine, who said: "Tomorrow you have to bring three face masks to your work." Her justified objection that they're difficult to come by was met by the boss' curt reply: "It's your problem. The night is long. There's enough time to sew them."

Celebrating 20 Years of the Fall of Berlin Wall

What was the major political event in the last two decades? The Fall of Berlin Wall! Today we celebrate twenty years since the fall of the Berlin Wall. Even though the Berlin Wall fell between Eastern and Western Germany, the whole world was affected. But the fight for freedom, democracy and free market is not over yet! We can still see hubris of the Berlin Wall further to the East as well as all over the world.

I usually like to make reference to the Economist to make my point clear. And I looked forward to this week's issue. But I am honestly disappointed with the Economist's dull celebration of the greatest political event in the world's modern history.

George Mason University's Professor Peter Boettke has much more interesting blog post on the Fall of the Berlin Wall (including very cool YouTube video):

"November 9th 1989 --- forgive me if I still get choked up about it 20 years later -- is a critical date in modern history whose significance should never be forgotten.  Those of us who believe strongly in the freedom of the individual and in the power of voluntary civil associations (including the profit motive of the market) to resolve social dilemmas instead of relying on the coercive power of the state have lost much of the ground we gained in the 1980s and 1990s during the time since 9/11, and especially this past year. But we still can rejoice in this shining example of the victory of the individual over the collective.  Freedom was celebrated that day by people who were oppressed by their government for far too long."

Btw, I highly recommend you reading another post by Richard Ebeling.

If you are interested in the political economy of the Soviet Perestroika and post-Soviet transition, I also recommend you reading these books by Dr. Peter Boettke: Calculation and Coordination and Why Perestroika Failed. These both books are always on my desk.

Eminent Domain: Russian Version

Moscow's city council shows little respect for private property rights in land. The authorities cater to interests of real estate developers by displacing villagers and destroying their private property without compensation. How do the government officials get away with this? They claim that since land titles were given by the Soviet government, hereby, they could not be acknowledged by the Russian law. I guess it's just another "rock thrown in a harbor" of the Russian system of private property rights.

Here are some quotes from today's NYT article by Michael Schwirtz:

"They gave us this land and told us to develop it," Ms. Gurlynina, now 78, said. "They said we could stay here forever." Then, early one morning last year, the bulldozers arrived. The municipal government had declared that the Soviet-era permits giving Ms. Gurlynina and her neighbors use of the land were invalid, and it had ruled that the 200 or so homes in Ms. Gurlynina's community, called Rechnik, as well as dozens of others in a neighboring community, had to be removed. Moreover, the city said, the residents would have to pay for the demolition themselves.

What is Gas War Good for?

EU-Reporter's Gary Cartwright warns us about another round of Russia-Ukraine gas war. While Ukrainian politics is gridlocked by former allies, President Yushchenko and Prime Minister Tymoshenko, Russia's Prime Minister Putin steps in to remind Europe that Russia's gas supplies can be again affected by the unstable political situation in Ukraine:

"Putin appears to be trying to draw the EU into its dispute, which one might see as manufactured in a committee room just off Red Square, claiming that Brussels is making the situation worse by refusing to subsidise Kiev. The Ukraine had asked the EU for a $4.2 billion loan to pump Russian gas into its underground storage tanks. "The EU has not given Ukraine any money," Putin told leaders of his United Russia party on Friday. "Ukraine has not received a single cent, not one hryvnia."

Is a Post-American Europe Real?

Economist's Charlemagne blog features a new paper by the European Council on Foreign Relations (ECFR) that weighs pros/cons of supposedly coming status quo change in the world politics:

The paper focuses on a clever and important thought, namely that America is well underway with its analysis on how to operate in a "post-American world", (ie, the much-discussed new world in which the brief post-Soviet era of unrivalled American hegemony has been challenged by the "rise of the others".)

The ECFR paper concludes: "Europeans might have more success if they worry a little less about what the US is up to and a little more about defining and asserting their own common interests in relation to Russia… They need to make it harder for the Russians to play on their divisions by presenting a more united front to Moscow, not just on issues such as energy but also on the wider economic relationship that is waiting to be developed to mutual benefit."

I recommend reading a section that contains concluding remarks. It starts on page 61. If that's the best what they could come up with, then … good luck with being "a post-American Europe". Btw, here is my op-ed at EU-Reporter about a post-American Ukraine.

Russia’s Gas and Ukraine’s Political Mess

Russia's Prime Minister Vladimir Putin typically rushed to accuse Ukraine of failing to make monthly payments for Russian gas. Mr. Putin even suggested EU to lend Ukraine at least $1 billion to help it pay for gas supplies.

BusinessWeek's Lynn Berry quotes Mr. Putin:

"Let the Europeans throw in a lousy billion," he said in televised remarks after talks with Danish Prime Minister Lars Lokke Rasmussen.

"Why have they gotten so stingy down there? Let them get something out of their pockets," he said, in typically colorful language. "They have money, too."

Lynn Berry also writes that Putin first raised the gas payment alarm last Friday, when he said that Ukrainian Prime Minister Yulia Tymoshenko had warned him that Ukraine's president, Viktor Yushchenko, was making it difficult to pay the gas bill. Once again Mr. Putin can't help himself to stay neutral when it comes to the Ukrainian politics. Btw, Mrs. Tymoshenko whose government runs the state-owned natural gas company NAFTOGAZ is responsible for Russian gas import and payment. President Yushchenko has nothing to do with this. However, the upcoming presidential elections create more benefits from any black PR. Did I mention that the Tymoshenko government bans to use black PR against prime minister?

Ukraine’s Practice of Unfair Trade Is All Time High

According to a new report from the Centre for Economic Policy Research, Ukraine imposed the most tariffs on commercial products among other countries. China that discriminated against 163 nations is second to Ukraine.

Once You Are Bailed Out, You Don’t Come Back!

One of the fundamental principles of economics tells us that people respond to incentives. In a free market economy, profit that is definitely the best incentive directs business toward activities that increase wealth. However, the 2008 recession showed that the Ukrainian government as well as the American government had different take on the key element of economics. I am taking about bailing out.

The Tymoshenko government bailed out couple private banks by purchasing around 90% of stocks in each privately-owned bank. For instance, state bough out Rodovid Bank. Everything seemed to be OK until a new announcement made by the Rodovid bank's administration. Rodovid needs additional $1 billion to restructure its debt. Ernst & Young will supervise Rodovid's debt restructuring. It looks like the Tymoshenko government is really good in turning any lucrative business in a bankrupt. I still wonder how did the government manage to let the state-owned oil company NAFTOGAZ go bankrupt?

The main problem is not even bailing out again. Now a main issue is that the Tymoshenko government has no money to finance a bail-out. A money-printing stunt thrown by the National Bank of Ukraine has already inflated domestic money supply to all time high of the last decade. Inflation is rampant in Ukraine! Moreover, the government budget resources are almost exhausted. At present moment, the government budget has less than $100 million at its disposal that is even lower than the dramatic 1998 level. Russia's prime minister Putin has already rushed to reprimand Ukraine's president Yushchenko for defaulting on payments for Russia's natural gas. Wait a sec, what does Ukraine's president have to do with this? Ah, it must be the politics.

So what does the Tymoshenko government do in search of external financial resources? The government announces sales of government bonds. The Tymoshenko government sells 6-month Ukraine's government bond with 30% yield! Even Brazil is more modest with 8.76% yield on its 6-month government bonds. Many domestic and foreign experts express their concern that the Ukrainian government can run a Ponzi scheme. I agree that it looks really weird.

Assorted Links

1. The most recent public opinion poll conducted by the Kyiv International Institute of Sociology shows that POR's presidential candidate Viktor Yanukovich has more than 40% of public support.
   
2. According to the Legatum Prosperity Index, Ukraine beats Russia in terms of economic development. Ukraine holds the 61^st place (out of 104 countries) in the Legatum rankings while Russia is only the 69^th. Here is a diagram that compares Ukraine with Russia.
   
3. Social capital improves in Ukraine. Car-owners join brand-based social clubs such as Subaru Kyiv, Daewoo Brothers, Mazda United etc. Members of car clubs call themselves brothers in wheels.

Taras Kuzio on Ukrainian Politics

Myroslava Gongadze, a leading anchorwoman of Ukraine's Voice of America, interviewed Dr. Taraz Kuzio, Professor of Ukrainian Studies at University of Toronto.

Overall, I agree with Dr. Kuzio except his take on "constitutional anarchy" in Ukraine. I believe that the 2004 Constitutional Amendment that delineated executive power between president and prime minister brought a very important system of checks and balances that Ukraine needed for a long time.

 

Assorted Links

1. A sin tax in Russia. Is it really Pigovian tax? Ukraine deals with national vice in a simpler way.
   
2. Media freedom is under threat in Eastern Europe. What about Ukraine?
   
3. Taras Kuzio with a superb preliminary analysis of Ukraine's presidential campaign.

Ukrainian Cuisine

People often ask me about Ukrainian cuisine. What's that like? What do people eat in Ukraine? What are the most popular dishes? Ukrainians are a very carnivorous nation. Btw, there's a really funny movie Everything is Illuminated with Elijah Wood who plays a vegetarian American Jewish teenager who goes on a heritage trip to Ukraine. This movie has a funny episode that shows how hard it's to be a vegetarian in Ukraine.

Anyways, Ukrainian cuisine differs across Ukraine. In the West, most dishes are very close to Hungarian and Polish cuisine. In the South, you can really enjoy food if you are piscatorial. If you like spicy and kebab-type cuisine, you should go to Crimea that is the most Southern part of Ukraine. In the Eastern Ukraine, food is closer to Russian cuisine.

So here are my top three dishes from the Eastern Ukrainian cuisine:

1. The Borscht. Topped with a sour cream. Main ingredients are sugar beets (they give it a red color), potatoes, carrots, and beef.
   
2. Any kind of blintz. This picture shows you blintz stuffed with ground beef. They are usually served with a sour cream too.
   
3. The potato pancakes aka dranniki. With a sour cream again.

From UkraineWatch

From UkraineWatch

From UkraineWatch

Ukraine’s Gambling Industry Goes Online

Ukraine's Prime Minister Tymoshenko has already built a reputation of anti-market politician. Few Ukrainians were surprised when the Gambling Bill introduced by the Tymoshenko government went into effect last month. In brief, this bill outlaws operations of gambling industry within metropolitan areas except in the specially designated zones for gambling. The gambling zones will be established in suburbs farthest from the downtown. It's not clear how the government will regulate a size of the gambling zones. Will all gambling business be able to fit in these still-to-be-built zones? Neither anybody knows whether owners of casinos will be compensated for business liquidation and relocation. By the way, who is going to build the gambling zones? There are too many unknown variables in this equation.

Why would you do it at all when Ukraine's economy is going through a deep recession? Don't you need to support business instead of shutting it down? What about other jobs which are related to the gambling industry? Btw, the gambling business generates more than 30% of local tax revenues in Ukraine. For instance, tax revenues from the gambling business made up 60% of a city's budget in Kharkiv, the second largest city of Ukraine. However, Mrs. Tymoshenko proudly uses the Gambling Bill in her presidential campaign. One of her campaign ads says: "Gambling Business is Outlawed: She (Mrs. Tymoshenko) Works!"

But Ukrainian entrepreneurs strike back! The owners of gambling business found a way to keep their operations at the old establishments. The entrepreneurs swapped casino's license for internet café's license. The former casinos became the internet cafés. Brand new desktops with internet access replaced slot machines and poker tables. Now the former card dealers introduce themselves as IT consultants. Btw, you can still buy buzz there. So how does it work? It's simple. You just play the same games online. Instead of buying chips, you deposit $100 to your internet-based account and then play black jack, throw a dice and so on. The owners of "internet cafes" say that after all they benefited from the Gambling Bill because they found ways to cut down their costs. One, internet café license is cheaper than the gambling license. Two, Ukraine's Tax Administration classifies internet café as a sole proprietorship for tax purposes so that the entrepreneurs just pay a flat income tax of 300 hryvnia ($40) regardless of their total revenues. Three, they also cut down on their labor cost because the internet café needs much fewer workers than a small-scale casino. Overall, the Gambling Bill is a really bad idea. It definitely hurts a gambling business that is one of the major sources of tax revenues in Ukraine. So far the effect of the government regulation was partially cancelled out by emergent entrepreneurial response. Let's hope that the internet café business is not the next on the Tymoshenko list.

From UkraineWatch

It’s a Final Countdown

For the fourth time in its history, Ukraine will have the presidential election. It will be less than in 90 days. The main competition will be between both pro-Russian politicians: prime-minister Tymoshenko and POR's front-runner Yanukovich. The Central Election Committee of Ukraine estimates that the government will have to spend at least $160 million on the elections. A registration fee for each presidential candidate is $314k.

According to the most recent public opinion poll SOCIS, the most popular presidential candidates are 59-yo Viktor Yanukovich (28.7%), 48-yo Yulia Tymoshenko (19%), and 35-yo Arsenyi Yatseniuk (8%). Ukraine's president Viktor Yushchenko enjoys only half of public support of another Orange Revolutionary, Yulia Tymoshenko. In terms of political ideology, Mrs. Tymoshenko represents the left-wing of Ukrainian politics, while Mr. Yanukovich poses himself as the right-wing and Mr. Yatseniuk is in the center. If we use analogy with the American politics, Ukraine's prime-minister is a socialist democrat where Mr. Yanukovich is a republican and Mr. Yatseniuk is independent.

Assorted Links

1. Only 57% of Russians say that their country needs a democracy. Ukraine's big brother demonstrates the path dependence at its best!
   
2. Russia and China strengthen their strategic partnership. Russia diversifies its energy sector by selling 70 billion cubic meters of natural gas to China.
   
3. The Russian government bans Stalin-era research. History Professor Mikhail Suprun is arrested for conducting a research on ethnic Germans deported by Stalin. Don't major in Soviet History!
   
4. An outrageous case of child molestation in Ukraine, in the world-known summer camp Artek. Several BYUT members allegedly committed child molestation.

Ukrainians Are Getting Poorer

According to Ukraine's State Statistics Committee (UKRSTAT), a real wage rate dropped by 11.3% as compared to the Q2 of 2008. A rising unemployment (9.9%) and a rampant inflation (16%) seriously damaged real incomes of Ukrainians. UKRSTAT reports that a real disposable income shrank by 8.3 in the Q2:2009 as compared the Q2:2008. If you look across provinces (oblast'), Kyiv province has the highest level of work compensation with average monthly salary of 3,126 hryvnia or 390 USD. The lowest level of salaries is in Ternopil province where on average you can get paid 1,443 hryvnia ($180) per month. UKRSTAT also reports that a construction industry that was severely hurt by the 2008 recession experienced the sharpest decline in the real wages among all industries. On average, the monthly wage rate dropped by 23.2% in the construction sector. Here is a graph that demonstrates a percentage change in the real wage rate in Ukraine between 2000 and 2009.

From UkraineWatch

Odessa Chemical Plant's Privatization: To Be or Not To Be?

Ukraine's State Property Fund (henceforth, SPFU) fails to sell the Odessa Chemical Plant that is a monopolist in Ukraine's chemical industry. Moreover, Odessa Chemical Plant is the largest producer of ammonium nitrate in Eastern Europe.

Here are the events behind the failed sale. First, the privatization was mission impossible from the start because it was outlawed by Ukraine's President Viktor Yushchenko. Presidential Decree #200:2007 prohibited a privatization of the Odessa Chemical Plant because it held strategically important position in Ukraine's market for chemical products. Nonetheless, prime-minister Tymoshenko and SPFU persuaded bidders and public that it could overrule the presidential ban on privatization. Then the ban should be overruled before the start of auction, right?

Anyways, several bidders decided to participate in the auction and paid upfront 400 million hryvnia ($50 mln) in auction fees. One of the bidders was GAZPROM-owned Azot-Service Company. The auction was broadcasted on several national TV channels. SPFU offered a starting bid of 4 billion hryvnia while all experts including SPFU agreed that the real market value of the Odessa Chemical Plant was at least 8 billion hryvnia ($1 bil). Then Ukraine's Nortima Company that is a part of a Dnepropetrovsk-based corporation Privat offered the winning bid of 5 billion hryvnia. Privat's CEO Ihor Kolomyisky said that he was ready to offer up to $1 billion. Little did he know that SPFU would refuse to recognize the legitimacy of the auction? SPFU's official statement is that the winning bid was much lower than the real market value of the auctioned item. So the deal is off.

It's hard to understand the true nature of all commotion around the Odessa Chemical Plant. Prime-minister Tymoshenko who makes a rule of law as a cornerstone concept of her presidential campaign does not really show a lot of respect for the rule of law. It's also not clear why president Yushchenko refuses to auction off the Odessa Chemical Plant that he was very eager to sell three years ago. Perhaps, the failed privatization best illustrates only the Tullock rectangle.

From UkraineWatch

Assorted Links

1. EU-Reporter features my op-ed "Post-American Ukraine?"
   
2. A direct sale auction for Ukraine's largest chemical plant goes awry. The Tullock rectangle is at its best.
   
3. Ukraine's Oil-Gas State-Run Monopolist indicates default on bonds. A coordination failure!
   
4. Since January's elections get closer, you can find the following web-sites very interesting:
   

   Web-site of President's administration
   

   Web-site of Ukraine's Parliament
   

   Web-site of Ukraine's Constitutional Court
   

Ukraine's Prime Minister Calls for Dictatorship

First two weeks of presidential campaign show that it ain't gonna be pretty. Ukraine has a real shot at sliding back to autocracy!

Ukraine's leading TV show SHUSTER-LIVE hosted prime-minister Tymoshenko. Mr. Shuster announced that he invited Ukraine's prime-minister to have public policy discussions with domestic and foreign journalists on live TV. Several members of POR party also showed up though their front-runner skipped the improvised face-off. Mr. Tymoshenko expressed her disappointment that she could not debate with POR's presidential candidate Viktor Yanukovych.

Anyways, Mr. Shuster started a discussion from the government ban on black (negative) PR. Last week the Tymoshenko government issued a ban on using black PR against Mrs. Tymoshenko in the presidential campaign. In other words, you cannot use mass media to criticize the government. At least internet is still free from the government censure. Ukrainian mass media expressed concerns that the ban would slide Ukraine back to Putin's standards of independent media. In contrast, Ukraine's prime-minister says that it will only improve the political competition. Oh, really?

Then Mr. Shuster moved the discussion to the 2004 constitutional amendment. In brief, this amendment separates powers between president and prime-minister where the former is responsible for foreign policy and the latter takes on duties of domestic policy. And then something happened that shocked everyone. Mrs. Tymoshenko said on live TV that Ukraine needs dictatorship! In her own words: "People are tired of a chaos. I am also tired of this chaos in Ukraine. Sometimes I really think that Ukraine needs dictatorship and rule of law. Only dictator can maintain the rule of law in Ukraine". Her words were a cold shower for all journalists present in the studio. Later in the show she tried several times to explain that she meant the rule of law when she referred to the dictatorship. Then one journalist asked her whether she would try to change the constitution to increase the presidential power if she were a president. She said that it would depend on a public opinion.

Well, when you hear something like that from the top government official, it must raise your concerns about Ukraine's political development. Ukraine is one of the few consolidating democracies among the FSU countries. But I am afraid that Ukraine might follow the path dependence of the FSU political development in the aftermath of the presidential election.

 

Ukrainian Hryvnia's Plunge

The Ukrainian hryvnia is the worst performer against the dollar at present moment. The hryvnia has already lost more than 80 percent against the US dollar since September 2008. It was traded at 4.50 per US dollar last September in Kyiv, Ukraine's capital. Now it is traded at 8.50 per dollar. These pictures taken on the streets of Kyiv show a depreciation of hryvnia against dollar between September 2008 and September 2009.

From UkraineWatch

The main source of hryvnia's depreciation is a rampant inflation. The Tymoshenko government printed money at a steady rate since the start of recession. Ukraine's inflation rate was 26% a year ago. Now it's 16% that still leaves the Ukrainian economy with one of the highest inflation rates in the world. I am afraid that the government will print much more money closer to the presidential elections. She would pull the inflationary stunt to increase her constituency in the public sector by raising and paying wages and pensions of public sector employees. Does she understand that a majority of Ukrainians hold their savings in hryvnia and making dollar-pegged credit payments? Thus, most Ukrainians are getting screwed big times by the Tymoshenko government. Here is a funny cartoon that shows how hard prime-minister Tymoshenko works at the money printing machine. The cartoon's caption says "She Does Work!" by making a sarcastic reference to her presidential ads featuring the same caption.

From UkraineWatch

I just don't understand why the National Bank of Ukraine didn't lower the interest rate to boost the national economy instead of running a money printing machine. It would still have the depreciation effect though with a lower inflation.

But there are some bright spots in a quite gloomy picture of Ukraine's economy. The Ukrainian economy has been export-driven since the late 1990s. Steel industry was the major exporter with a 40% share of the total exports. A double-digit depreciation of hryvnia significantly boosted the industrial exports. According to the State Statistics Committee of Ukraine, the steel output grew by 16% in July and 10% in August. Moreover, Ukraine is also one of the world's top ten exporters of grain, sunflower, and corn. Did hryvnia's depreciation make export-oriented agro-producing firms better off? Yes, it did. Agricultural output demonstrated a 4% growth in Q2 of 2009.

Ukraine Seriously Needs Harvey Milk

It's been less than a week since a homophobic scandal surrounded Sir Elton John's visit to Ukraine and his humble attempt to adopt a 14-month-old HIV-positive orphan. And Ukraine has already had another outbreak of homophobia. Now it went much further than Minister Pavlenko's rambling statements about Elton John's Ukrainian adoption. Btw, it still remains a mystery whether Elton John's hubby meets the age requirements to adopt baby Lev or not. I also really wonder whether Minister Pavlenko has finally established whether baby Lev is orphan or not and whether baby Lev has HIV or not. Btw, will Minister Pavlenko make an official apology to Sir Elton John on behalf of the homophobic government? What about baby Lev? Will he just stay in the orphanage after all commotion?

Anyways, if an American gay activist Harvey Milk were alive today and somehow found himself in a downtown of Kyiv, Ukraine's capital, he would be unpleasantly surprised. He would see the anti-gay rally organized by Ukraine's NGO Love vs Homosexuality aka Love Contra. A very mixed crowd that ranged from teenage girls to grandmas protested against homosexuality in Ukraine. NGO Love Contra asked the government to reconsider a gay sex as a sex crime as it was in the Soviet Criminal Law. Protestors also carried posters with the following anti-gay statements: A Father Can Be Anybody, But a Father Can't Be a Mother; Mother + Father = Child; We Must Stop Homo-dictatorship! (Apparently, the Ukrainian democracy is over); You Aren't Born Gay, You Become Gay; Homosexuality = AIDS; Protect Your Motherland and Your Kids (I guess from gays).

You'll be surprised by a reaction of Svyatoslav Sheremet, a head of Ukraine's Gay Forum that is a leading gay rights organization in Ukraine. He says that NGO Love Contra made him a huge favor by getting together so many people and informing them about Ukraine's gay movement. I don't like Mr. Sheremet's position that must represent a view of the main gay activist of Ukraine. He still needs to learn a lot from his American role model. Why? One, a majority of Ukrainians is homophobic. Two, Ukrainians are homophobic because the whole "coming out of closet" thing is just very new to them. Common, people still have problems with getting used to a market economy and a democracy. The obvious question is: How are Ukrainians homophobic? Well, they'd rather accept you as Jewish friend than as gay friend. If you doubt my words, you can look up the public attitudes towards Jews and gays in Ukraine here. Anyways, the recent events clearly show social tensions between the gay community and general public. Though the Ukrainian politics is very far from making gay rights the main political issue, the gay problem must be addressed so that the Ukrainian society can get rid of the anachronistic fears of homosexuality and move on to celebrating Gay Pride Week or GLBT's October.

The Post-American Ukraine

This week shows that USA gives up on Ukraine. NATO gives up on Ukraine as well. The Obama administration decided to abandon a controversial missile-defense system that the Bush administration planned to build in the Czech Republic and Poland. The infamous air-defense system always rattled Mr. Putin and Mr. Medvedev. Now they can sleep well. No defense system in Eastern Europe, no threat to Russia. But can Ukraine sleep well now? No. Ukrainian politicians just woke up in a new world to them – the post-American Ukraine. Since Ukraine's breakaway from the former Soviet Union a main objective of the Ukrainian foreign policy was to distance itself from Russia and get closer to Europe. Not anymore! Nobody needs Ukrainian democracy in EU. Nobody welcomes Ukraine to NATO. Whoever will become the next president of Ukraine, he or she will have to come up with a new foreign policy if Russia gives him or her freedom of choice.

Now let's get back to Russia. If Mr. Medvedev believes in a tit-for-tat strategy in his foreign policy, then Russia must express a gratitude to the friendly Obama administration. So what does Russia do? According to the Economist, Hugo Chavez said that Venezuela would buy 92 tanks and a missile system from Russia with a $2.2 billion loan given by Russia. Wait a sec. Russia thanks USA by selling guns to anti-American Venezuela. What does the US do? The United States expresses concern over an arms race in the South America.

What else has Russia recently done? Mr. Medvedev has sent an aggressive and insulting letter to Viktor Yushchenko, Ukraine's president. Russia's district of attorney says that it has enough evidence to prove that several Ukrainians fought on the Georgina side against the Russian troops in the 2008 Russia-Georgia war. Russia's state-owned energy company GAZPROM has already told Ukrainians that they'll have heat and electricity in their homes only if their next president is pro-Russian politician. I am also afraid that Mr. Putin hasn't forgiven his biggest political embarrassment yet. Five year ago the Orange Revolutionaries, Yulia Tymoshenko and Viktor Yushchenko, brushed Mr. Putin off after he rushed prematurely to congratulate Viktor Yanukovich as winner of the rigged presidential election. The upcoming presidential election offers Mr. Putin to get back on both Yushchenko and Tymoshenko. January's presidential election in Ukraine will become the key event in Russia's new political season.

So which presidential candidate does Russia want to see as Ukraine's next president? The first choice must be Viktor Yanukovich. However, president Yushchenko's party OUNS speculates that Mrs. Tymoshenko has already made a deal with Russia.

Ukraine’s Land Reform in Faces

I conducted a fieldwork in Ukraine between two summers of 2007 & 2008. It's approved by the Human Subject Review Board (HSRB) at George Mason University. Every social scientist has to go through HSRB if your fieldwork involves interviews with human subjects (that's how HSRB calls people).

Why did I conduct fieldwork in Ukraine? First, I am very interested in the aftermath of Ukraine's privatization and its unintended consequences for Ukrainians. I've also noticed that Ukraine has developed a very interesting mix of socialist-capitalist property rights system since its breakaway from the FSU. Second, I strongly believe that a quality of fieldwork improves significantly when you understand indigenous culture and speak indigenous language (in case of Ukraine, you have to speak both Russian and Ukrainian or their mixed version Surzhyk). Otherwise, you'll be either brushed off for cultural ignorance or lost in translation. I'll post more about my fieldwork soon. But now I'd like to invite you to check out a photo report about my fieldwork because I honestly believe that one picture is worth ten thousand words.

Sir Elton John is Not Old to Adopt Ukrainian Child

Minister Pavlenko changes his argument about Sir Elton John's adoption of a 14-month-old HIV-positive Ukrainian orphan. Now Mr. Pavlenko says that baby Lev (that's orphan's name) is not an orphan and nobody has confirmed a fact of his HIV-positive status yet. So it turns out that this kid has a mother and an older brother who still have parental rights over him. Moreover, it is not clear yet whether the kid has HIV or not.

Well, it's all very interesting except for one tiny detail that baby Lev resides in the orphanage for the HIV-positive kids. What's going on? Mr. Pavlenko says that social workers are working with the mother and they are trying to persuade her to start a new life and take back baby Lev.

Anyways, Minister Pavlenko gave up his argument about Elton John's age after the Ukrainian mass media pointed to him that John's partner David Furnish met the age rule for the child adoption. Now Mr. Pavlenko says that Sir Elton John still cannot adopt baby Lev because the poor boy has a biological parent who has a priority for his re-adoption. It's a real mess.

Finally, Mr. Pavlenko says that mass media violated a privacy of the kid and his family when his name and health status got exposed in the media outlets all over the world. Well, what can I say? Minister Pavlenko does not like the Pareto improvement.

Ukrainians have the worst teeth in Europe

I stumbled on a very interesting fact about Ukraine while I was browsing Dr. Rosling's GAPMINDER web-site. An average Ukrainian 12-yo child had 4.4 bad teeth in 2004. This makes Ukrainian kids have one of the worst smiles in Europe. Bosnia and Herzegovina was the only country in Europe where the child dentistry was in much worse shape than it was in Ukraine. An average Bosnian or Herzegovinian 12-yo child had 4.8 bad teeth in 2004. I am not sure why Ukrainians kids have the worst teeth in Europe. Ukraine's dentistry is up to European standards. Dental services are also quite affordable given the current level of income. Tooth paste and dental floss are not the luxury goods either. Could it be that Ukrainians kids just have the sweet tooth? Or should I say the sweetest tooth in Europe? Could it be that their marginal benefits from having a sweet tooth are much higher than their marginal costs from having a bad tooth?

Russia’s Oligarchs Got Hurt Badly by the 2008 Recession

I decided to take upon the Forbes method of reckoning the economic consequences of the 2008 recession. According to the Forbes, total net worth of Russia's billionaires dropped from $471.4 billion in 2008 to $92.6 billion in 2009, as shown in Table 1. In other words, the fortunes of the Russian riches shrank five times or by 80%. So on average the Russian billionaires lost almost half of their wealth. If the average "Abramovich" had $5.4 billion in his pocket in 2008, then he had only around $3 billion a year later. The Forbes' World's Billionaire List featured almost 90 Russians in 2008. Now the Forbes' list has only 28 of them.

Btw, according to the Economist, Russia's GDP shrank by almost 11% in the Q2 of 2009 as compared to the Q2 of 2008. Russia's GDP was $2,266 trillion in 2008. So Russia's economy lost around $250 billion, while Russia's oligarchs lost about $378.8 billion. Thus, Russia's oligarchs lost more than Russia's economy, ha?

Table 1. The Forbes' List of Russia's Billionaires, 2008-2009.

Year	2008	2009	Abs. ∆	% ∆
Total Net Worth ($ bil)	471.4	92.6	5.1	80.4
Number of billionaires
Russian citizen	87	31	2.81	64.4
Russian resident	81	28	2.89	65.4
Foreign resident	6	3	2	50