The Curse of the FSU

Sometimes I really think that the former Soviet Union (henceforth, FSU) casted a curse on its former republics. There are only three decent countries out of 15 FSU republics. I mean the Baltic States (Latvia, Lithuania, and Estonia) which are EU members. Honestly, it was not a big surprise that the Baltic States had a very smooth and fast transition from socialism to capitalism and from autocracy to democracy. The Soviets always referred to the Baltic trinity as to Europe. If you wanted to see Europe, you would go to Latvia, Estonia or Lithuania. Those countries were always different.

What about the rest of FSU? The Central Asian FSU countries are typical examples of the oriental despotism. Kazakhstan allows for a relative economic freedom in the export-oriented sectors (oil and gas) of the economy while other individual liberties are extremely limited. President Nazarbaev did not really embrace the notion of the democracy and remained in power since the collapse of the FSU. Turkmenistan and Uzbekistan are just weird countries. Tajikistan is always on the edge of becoming a failed state. The Caucasus group is more appealing than the Central Asian group. While Azerbaijan follows the Kazakhstani model, Armenia and Georgia are OK. Armenia is highly acclaimed for the well-done land reform. Georgia was doing fine after the Rose Revolution but the war conflict with Russia undermined its democratic transition.

Finally, let's take a look at the European group of the FSU countries: Russia, Belarus, Moldova, and Ukraine. The Polity Score that measures the level of political freedom (e.g. 0 denotes absolute autocracy and 20 denotes consolidated democracy) was 16.36 for Ukraine and 9.22 for the rest of the FSU countries (Polity IV, 2009). Ukraine's political environment has significantly improved since the breakaway from the FSU. Ukraine is one of the freest countries in the FSU region (Freedom House, 2009). Ukraine is free as it has never been before. Ordinary Ukrainians enjoy a higher level of political and economic freedom than their FSU's neighbors in Belarus, Moldova and Russia. While all four countries started with the same level of freedom, they moved in different directions. Belarus and Russia slipped into autocracy. Moldova whose GDP per capita is half of Ukraine's level has the communist government and the very weak rule of law.

So what is going on with most FSU countries? There are so few democratic and capitalist countries among the FSU states. Is it just a path dependence that most FSU countries cannot overcome? If I were a superstitious person, I would say that it could be the curse of the FSU. But I say that we need to dig deeper in the cultures of these countries. I think that the culture can explain why the FSU states have followed the different transition paths.

An Unfettered Faith in Free Markets and Limited Role of Government are Under the Test

The discrepancy in the economic performance of the FSU countries is mainly responsible for how easily the world political leaders turn to Keynesian macroeconomic policy. The FSU economies demonstrated such a weird discrepancy in their post-socialist transition that we could hardly prove the importance of individual liberty and private property for economic growth. While Latvia, Estonia, and Lithuania are not only the first bastions of democracy and market economy in the FSU region, they are also very successful examples of economic liberalization of former socialist states. But the heretical examples of Russia, Belarus and Kazakhstan make it hard to defend the unfettered faith in free markets and limited role of government. Moreover, the current economic recession gives more fodder for the critics of economic liberalism because the freest FSU countries such as the Baltic States underwent much harsher economic downturn than their authoritarian counterparts like Russia and Belarus. The Baltic trinity (i.e. Estonia, Latvia, and Lithuania) have the sharpest fall in their GDPs as compared to the first quarter of 2008. While Russia has a 6% drop in GDP and Belarus has a 4% fall in GDP, the Baltic States are experiencing a double-digit fall in GDP with 18% in Latvia, 15.6% in Estonia, and 12.6% in Lithuania (see). Ukraine is somewhere in between Russia and Lithuania with an 8% decline in GDP (see IMF World Economic Outlook, April 2009).

Ukraine’s Political Transition

Let's evaluate Ukraine's political transformation until nowadays. So Table 1 (see the previous post) presents the main indicators of the political institutional quality for Ukraine, Russia and the former Soviet Union (FSU). An annual research report "Nations in Transit" released by Freedom House in June 2009 is the primary data source. According to the report, Ukraine's quality of political institutions is above that of the FSU and Russia. Ukraine has a more independent judiciary than Russia and the rest of the FSU. The independence of mass media and the development of the civil society are very close to the levels in developed nations. The democratic institutions at both state and province are also of better quality. The electoral process is very transparent and up to democratic standards. The rule of law, the civil and the political rights are much stronger in Ukraine than anywhere else in the FSU. Overall, Table 1 shows Ukraine as a free state with a consolidating democracy as compared to non-free and authoritarian Russia and the rest of the FSU. Ukraine is actually the freest state among the non-EU FSU countries.

Where would I like to live?

Table 1. The Indicators of the Political Transition

	The FSU	Russia	Ukraine
Corruption	6.1	6.25	5.75
Judicial independence	5.83	5.50	5.00
Independent media	6.0	6.25	3.5
Civil society	5.13	5.75	2.75
Local democracy	6.17	5.75	5.25
National democracy	6.08	5.75	5.25
Democracy	5.92	6.11	4.39
Electoral process	6.00	6.75	3.5
Rule of law*	7	4	10
Civil rights	4	5	2
Political rights	5	6	3
Freedom score	Non-Free (NF)	NF	Free

Note: * denotes that data was available only for 2008. FSU - the former Soviet Union

Source: Freedom House