Black Market in Agricultural Land is Booming in Ukraine

with Oleg Peregon, Vice President, NGO Green Front, Ukraine

A sale of agricultural land has been illegal in Ukraine since the Moratorium Act of 1992. Despite many promises, neither administration liberalized a market in agricultural land. Nonetheless, a black market in farmland has thrived. Now it is becoming one of the largest illegal markets in farmland, with approximately $900 million in annual sales, in Eastern Europe. The black market has a backing of local state officials. Corrupt bureaucrats embezzle their power to stuff their pockets with cash while they are stripping the nation of important natural resource and robbing poverty-stricken rural population of their private property. The black market causes environmental degradation and undermines sustainable economic development of Ukraine, one of the major world grain exporters.

The moratorium has never stopped the black market in Ukraine. According to Ukraine’s State Committee on Land Resources (SCLR), almost 20 percent of farmland changed ownership in the last decade. And it seems that the black market is booming now more than ever. Kharkiv-based environmental NGO Green Front reports that a number of sales advertisements featuring farmland has increased in local newspapers recently. The popular local newspaper Premier went from 58 to 300 weekly sales ads in less than a month. The black market has also made it to the internet. Now you can find hundreds of listings of farmland sellers online. For example, online store AllBiz that is popular in Ukraine has almost 200 listings of farmland sellers. Many sellers’ websites even guarantee a one-day delivery of farmland.

The black market in farmland is going strong with no questions asked. The buyers are farms, greenhouses, flower shops, landscapers, and house owners who can afford landscapers. The sellers are either firms subcontracted by the local government or local state officials. The black market quantity is equal to a capacity of one truck (e.g. Russia-made Kamaz truck). A single Kamaz truck carries, on average, ten tons of soil. The black market price is seasonal with its high in spring and summer ($80-100 per ton) and its low in fall and winter ($150-180 per ton). According to the Green Front, the projected annual sales are almost $900 million in Ukraine.

This is how the black market works. An excavator digs out fertile soil, on average, up to four feet deep. Then an excavator loads a soil into a truck that delivers a product to a buyer. To double their profits, infamous entrepreneurs bring garbage from urban areas and dump it in the excavated areas. Thus, the damaged farmlands are converted into illegal landfills. This black market activity causes irreversible soil depletion and environment pollution. The SCLR reports that almost 32 percent of farmland is degraded and 20 percent of arable farmland is low-yield due to soil erosion. It is obvious that the black market could not reach the current volume of sales without backing of state and law enforcement officials. 

The state officials abuse law even when it comes to private ownership of their constituency. The black soil is extracted from two main sources: abandoned land and retiree-owned land. A so-called abandoned land is a land parcel whose heirless owner is deceased. Abuse of the abandoned land is just another proof of the government embezzlement because ownership of the abandoned land is transferred to the local authorities automatically in Ukraine. The magnitude of the power abuse is mind-boggling. When the NGO Alternative interviewed deputies (Party of Regions) of the Pesochyn village council in Kharkiv province, the second largest province of Ukraine, the Regionals said blatantly that the farmland sale is only legal in their county while it is illegal elsewhere.

Retirees who own farmland also suffer a great deal from the government abuse. The SCLR reports that 53 percent of land owners are retirees and 30 percent of them have no heirs. The Green Front reports several cases when the soil was extracted from the land parcels owned by pensioners in Kharkiv province. Several local residents tried to stop the illegal extraction of their land. However, the local government silenced the whistleblowers. The Green Front also submitted evidence of illegal extraction of land, including these pictures, to the Kharkiv department of law enforcement. The law enforcement officials considered available evidence insufficient to open a case. 

                                                                   NGO Green Front copyrights.

                                                                    NGO Green Front copyrights.

Right now it is too early to predict the impact of the black market in agricultural land on Ukraine’s economy, one of the major world grain exporters. It is clear that the current black market activity causes irreversible damage to the environment and retards economic progress. And the government embezzlement not only undermines a fundamental institution of capitalism and democracy – secure private property rights but also erodes trust and accountability in political order.

Who in the World is Freest of All?

   The long-awaited annual edition of the Economic Freedom of the World has been released by the CATO Institute, American public policy think tank. The CATO team of researchers, led by Dr. James Gwartney (Florida State University), Dr. Robert Lawson (Southern Methodist University), and Dr. Joshua Hall (Beloit College), measure a degree of economic freedom with respect to five areas of economic activity: size of government, rule of law, monetary system, international openness, and government regulation.

  Hong Kong still remains the freest economy of the world, followed by Singapore, New Zealand, Switzerland, Chile, Australia, Canada, Chile, the U.K, Mauritius, and the U.S. This is basically the top 10 of the Economic Freedom of the World report. 

    Zimbabwe is the least free economy of the world, representing the poverty-stricken region of Sub-Saharan Africa. The bottom 10 of the economic freedom rankings also includes Myanmar, Venezuela, Angola, Democratic Republic of Congo, Central African Republic, Guinea-Bissau, Republic of Congo, Burundi, and Chad. Let us hope that the new Miss of the Universe from Angola, Leila Lopez, can attract more international attention as well as foreign investors to her country.

    Where is Ukraine? Ukraine with the level of economic freedom measured at 5.7 out of 10 is actually in the bottom 20 economies. While the economic freedom grew during the Yushchenko presidency, Ukraine could not catch up with Russia. The CATO Institute ranks economic freedom in Russia (6.55 out of 10) much higher than in Ukraine by placing the former in the top 80 economies. Due to obvious political reason, Belarus is not in the rankings. If the Yanukovych administration does not stop a self-destructive public policy, Ukraine may stop showing up in the Economic Freedom of the World rankings as well.

  

    Overall, the CATO Institute points out that economic freedom of the world fell for the second consecutive year: “The average economic freedom score rose from 5.53 (out of 10) in 1980 to 6.74 in 2007, but fell back to 6.64 in 2009, the most recent year for which data are available.”

What is Ukraine’s Biggest Economic Woe?

Ukraine’s economy is still recovering from the global 2007-2009 economic recession that had a devastating impact on the national economy.  Economic growth rate is nearly half of the pre-recession average rate. Unemployment rate is approaching double digits. Inflation is rampant. Ukraine's external debt is nearly equal to Ukraine’s GDP. Overall, the economic situation is very drastic and it requires a new approach to the current economic policy.
A jobless stagnant economic recovery is very common among many developed and industrialized countries. The EU economy is still struggling with its recovery, hindered by the fiscally troubled PIIGS countries (i.e. Portugal, Greece, Italy, Ireland, and Spain). The European economists scramble to find a way to reduce Spain’s 20-percent unemployment rate and create strong incentives for a fiscal accountability for the PIIGS.
The U.S. economy is also going through a jobless stagnant economic recovery. The Congressional Budget Office (CBO), major nonpartisan American research organization, downgraded the US rate of economic growth to 1 % in the Q2. The US unemployment rate is 9.1% that translates into more than 14 million jobless Americans.
Of course, comparing Ukraine with the EU or USA is similar to comparing apples with oranges. A difference is very substantial to draw any fundamental conclusions. Nonetheless, Ukraine’s economy seems to be facing similar structural problems which are present in both the EU and USA.
So, what is going on with the American and European economies? The answer can be found in the hotly debated book, Great Stagnation, by Tyler Cowen, co-author of the one of the most popular economic and business blogs, Marginal Revolution and Professor of Economics from George Mason University, USA. Professor Cowen writes that the US economy as well as other developed economies got stuck because a supply of low-hanging economic fruit is exhausted.
What is a low-hanging economic fruit? Education, immigration, urbanization, natural resources, and technological innovation. According to Professor Cowen, the developed nations got stuck because they have been exhausting low-hanging economic fruit for the most part of the last century and eventually they hit the bottom. Growth rates of output and median incomes have a steady downward trend across the developed economies over the last few decades. This empirical fact supports Professor Cowen’s argument. 
Dr. Cowen writes that the United States and European countries have nearly exhausted a potential of educational attainment. Most population has not only high school diplomas but also college degrees. Instead of being a valuable asset, education is eroding its value because its marginal gain is diminishing. If there is any genius left without any formal education in the US or EU educational system, he or she must be hiding under a rock.
Economic impact of immigration is also declining because modern immigrants do not have the same comparative advantage (e.g. higher level of education, cheap labor force) as compared to immigrants in the 1800s and 1900s. Immigrants still contribute to economic growth of the developed economies but easy gains of immigration are nearly gone. Natural resources are also overexploited in many rich countries. The gold rush, the booming mining towns, and the oil booms are now subjects of economic history rather than economic reality.
Dr. Cowen also asks us to think about the most recent major technological innovation that drastically changed our lives. He argues that most innovations were exploited in the 1950s and 1960s, except for computers and internet. Cowen writes that even consumer goods did not have any major revolutionary change since the 1930s and 1940s when household products changed drastically: air conditioning, refrigerators, washers, dryers, dishwashers, radios, televisions, phones, and affordable cars. Modern households have the same household items with slight technological improvements.
Moreover, Dr. Cowen points out that an economic impact of consumerism is also diminishing because most households in the developed countries have already had all necessary household items. Many households have kitchen appliances, internet, several TVs, several laptops, several cell phones, several cars, and so on. Moreover, the global recession made consumers much poorer and more cautious about their spending and credit cards. As a result, the level of consumer confidence is pretty low in America, Britain, and Europe. The US consumer-confidence index has reached the lowest level (45%) since June 2009, the official start of economic recovery in the US. Thus, the Keynesian demand-side economic policy, the working horse of the American and European governments, is another low-hanging economic fruit that is nearly gone.  
Ukraine also fits Professor Cowen’s theory quite well. Ukraine’s economy has nearly exhausted a supply of low-hanging fruit. Educational attainment was always high in Ukraine, even back in the Soviet period. A flow of immigrants was never strong for Ukraine. In contrast, Ukraine suffered from a tremendous brain-drain before and after the collapse of the former Soviet Union. Blue-collar workers are also leaving Ukraine. Many workers from the Western Ukraine work permanently in Europe while workers from the Eastern Ukraine travel all the way to Moscow, Russia’s capital, to find a job at a construction site. Youngsters, especially women, use very popular work-and-travel programs to go overseas and stay there legally or illegally. Young people, blue-collar workers, and intellectuals leave Ukraine because of very limited opportunities available to them in their Motherland.
According to the State Statistics Committee of Ukraine (SSC), the unemployment rate remains at 9.5% or 2.1 million jobless Ukrainians. Unfortunately, the SSC does not report labor statistics about part-time workers who want to have full-time jobs and discouraged workers (who gave up looking for a job). Various independent surveys report that the actual rate of unemployment is around 18% or almost 4 million jobless Ukrainians. There is a drastic shortage of a demand for labor in Ukraine. A discriminatory nature of Ukraine’s job market supports data from independent surveys. Ukrainians know really well that your chances to get a job decrease exponentially with your age. Ukrainians also know that employers discriminate against females and, especially, single mothers. If you are 50 years-old female and without a job, your chances to find a well-paid job are close to nothing. Ukraine’s job market is both ageist and sexist.
Urbanization, natural resources, and technological innovation are also nearly exhausted by Ukraine’s economy. Ukraine as any European country is highly urbanized. So there is not a lot of potential for real estate and infrastructure development. Natural resources were also heavily exhausted, first, by the Soviet nomenclature, and then by the Ukrainian oligarchs. The technological potential of Ukraine is hardly competitive at the world level. The above-mentioned brain-drain diminished the potential of technological innovation significantly because neither state nor private philanthropists tried to prevent it by supporting scientists financially.
Things get worse if we bring into equation economic and political institutions existing in Ukraine. First, Ukraine’s economy is still in a “gray zone” somewhere between state-controlled and oligarch-controlled economy where state and oligarchs are not separate from each other. The “gray zone” economy retards any economic progress. Second, Ukraine’s political system is also in a “gray zone” of transitional democracy where the façade of political institutions looks appropriate but these institutions are rotten inside. Ukraine has a presidential-parliamentary political system without any working system of checks and balances. The political oligarchy retards any democratic progress. Finally, both economic and political institutions are subject to a pervasive lawlessness where those who must enforce the law abuse it. Thus, the oligarchic “gray zone” economy without any rule of law is the biggest economic woe of Ukraine. Under these circumstances, if there is any low-hanging economic fruit left, it is more likely to be rotten inside. Ukraine’s economic recovery can have a bitter aftertaste unless the current institutional status quo is changed.

Logrolling in Ukraine

     A logrolling or vote-trading is a common practice that elected officials use to pass laws. If you need a support from other elected officials, you promise them to vote for their bill in exchange for their votes. Ukrainian deputies went even further than a simple trading of votes. They trade their ID cards. If you need my vote, you can take my ID card and use it to vote for your bill.   
     Here is an amazing video that shows a session from Ukraine's Parliament. Click on this link and watch from :29 to 1:00.  You will see how a deputy checks in dozens of his colleagues. Then you will see that a head count (424) is far from an actual number of deputies. Finally, you will see how a deputy who uses several ID cards votes for his own proposed bill. Nonetheless, his bill did not pass the parliament. 
     Here is another video about logrolling Ukrainian deputies.

If you are interested in reading about logrolling, start here.

Ukrainian Workers Are Strike-Averse

    Another cool statistics from the Kyiv Post's Maria Shamota shows that Ukrainian workers had the lowest number of strikes in Europe in 2008. Ukrainian employees went on strike only thirteen times. Swedish workers had 18 strikes and British employees went on 144 strikes. Italian workers who are the leaders of the European labor movement went on 1,339 strikes in 2008. Even if you adjust number of strikes per capita, Ukraine still had the lowest number of strikes per capita in Europe.
    There are couple things which puzzle me about these data. First, workers in Austria, Belgium, Bulgaria, and Czech Republic did not go on strike at all because their strike was either cancelled or a conflict was resolved. Second, I do not see France in this chart while the international mass media often talks about French workers going on strike.
    Anyways, can we really say that Ukrainian workers are more strike-averse than their European colleagues? Is there another explanation behind these data? What if Ukrainian workers incur higher opportunity costs of going on strike than do their European counterparts?

Ukraine's Agriculture Policies

Ukraine is moving to liberalize its land market, but, according to recent statements by the country's agriculture minister, foreigners will be prohibited from purchasing agricultural land.
That was the topic of my interview with the World Politics Review. We discussed Ukraine's agricultural land policies. Click here if you want to read more.

FYI, here is a Russian version of my article "Robbing the Breadbasket" in the KyivPost. If you can read Russian, please, check it out and leave comments.

Ukraine's Economy Did Not Get Far Since The 1990s

I was surprised when I saw it. Ukraine's economy is not as active as it was in the early 1990s. Number of shipments is still much lower than it was in the early 1990s, reported by the Ukraine's State Statistics Committtee. Here is a very interesting graph that gives you a breakdown of quantity of shipments across Ukraine by type of transportation: air, water (sea and river), and ground (car and train). I wonder what explains a smaller number of shipments now as compared to the early 1990s. 
HT Maria Shamota from the KyivPost.

MORE ON UKRAINE'S "GREAT GRAIN ROBBERY"

Here is my article in the Kyiv Post. The russian version of my article will come out on Wednesday.

The Ukrainian Weekly (June 5, 2011) has three articles, including mine article, about Ukraine's trade policy. I highly recommend you reading the current issue.  

ROBBING UKRAINE'S GRAIN MARKET: EXPORT QUOTAS AND EXPORT DUTIES

Ukraine, one of the top grain exporters in the world and nicknamed the bread basket of Europe, is being robbed by its government. A post-Soviet country located in Eastern Europe on an area slightly smaller than Texas has become a hostage of its mercantilist government. In October 2010 the Ukrainian Cabinet of Ministers presided by a former apparatchik, Prime Minister Mykola Azarov, enacted a resolution requiring quotas and licenses for exporting grain. The objective is to stabilize food prices and prevent a food shortage caused by last year’s poor harvest. While the protectionist policy came under harsh criticism from both foreign and domestic observers, the government extended the export grain quotas until June 30, 2011. Moreover, the government used corrupt practices of allocating export quotas and licenses wherein an unknown company Khlib Investbud received a lion’s share and gained the market power in the grain export industry. The grain industry generates 15% of Ukraine’s exports - $7.5 billion. The controversial regulation killed the spirit of competition in the domestic grain market and pushed it towards monopolization. Foreign observers express concerns that the monopolization of the export-oriented Ukrainian agriculture will contribute to higher food prices around the world. If the current trade policy is not reversed, surging grain prices will affect each of us negatively.


Quota and license are usually imposed to limit the quantity of a product and raise its price. The grain export license is given to a company by the state to buy the grains from domestic farmers at the domestic price and resell these grains at the world price to foreign buyers. Since the world price is higher than the domestic price, whoever receives the export license is guaranteed a profit of a middleman. Moreover, the export grain quota limits the quantity of export that results in a price markup. For all grains exported with the quota, the markup could total to billions of dollars. Thus, a licensed company that has an export quota receives a profit that is not earned through market competition. The government regulation creates the profit for the middleman which causes market inefficiency such market monopolization and wastes society’s resources.


Foreign observers have criticized the current trade policy on the grounds of its inefficiency. Morgan Williams, the President of the U.S.-Ukraine Business Council, estimated that losses in the domestic food industry could reach $5 billion as a consequence of the protectionist policy. According to Martin Raiser, the World Bank's Country Director for Ukraine, Belarus and Moldova, the present grain export quota system is inefficient and restricts the inflow of investment. Even with these sharp criticisms from foreign observers, the Ukrainian delegation in the World Trade Organization (WTO) defended the current export quota system by referring to Article 9 of the GATT (General Agreement on Tariffs and Trade) and Article 12 of the Agreement of Agriculture. The Ukrainian government promised WTO that “an export quota system was introduced in order to prevent a critical shortage in the domestic market resulting from a poor harvest in 2010 of certain agricultural products and eliminate a significant imbalance in the domestic grain market that is essential for food security and stability in the grain market”. Grains that fall under the regulation are crops produced by most domestic farmers: wheat, buckwheat, corn, barley, and rye.


In fact, the Ukrainian government lied to the WTO and the rest of the world to defend the protectionist policy. A “poor harvest in 2010” was a big fat lie. According to Ukraine’s State Statistics Committee, the “poor harvest of 2010” was above the average if you looked at the record of Ukraine’s grain production in the last two decades. On average, Ukraine’s agricultural sector produced 36,1 million tonnes of grain between 1990 and 2010. Ukraine’s agriculture hit the bottom in 2003 with a harvest of 20,2 million tonnes of grain while it reached the peak in 2008 with 53,2 million tonnes of grain. Thus, the “poor harvest of 2010” that was 39,2 million tonnes exceeded its average by 3 million tonnes. Nonetheless, in his controversial interview to the Kyiv Post, Ukraine’s Minister of Agriculture Mykola Prysyazhnyuk stuck to his guns and reiterated that the main reason for the regulation was the shortage of grain in Ukraine.

The current protectionist policy is an absolute failure because it hurts Ukraine’s economy. The protectionist policy that brought back the oligarchic “old family values” such as corruption protectionism, and nepotism sent a clear signal to foreign companies that Ukraine’s economy went back in the domain of the oligarchs. Foreign grain traders accused the Ukrainian government of corruption and nepotism because the distribution of quotas was not transparent. Grain traders had only seven days to apply for the export quota after the Resolution of the Cabinet of Ministers was enacted. As a result, most of the companies were unable to receive the grain availability certificate while an unknown company, Khlib Investbud, received the lion’s share.


Moreover, the export quota system that was designed to stabilize food prices failed to keep food prices from rising. Domestic food prices have increased by 20% since the quota system was introduced. Ukraine’s State Statistics Committee reports that prices of bread, sunflower and corn oil have increased by 12% since January 2011. The grain prices rose by 15% in the first quarter of 2011. The domestic consumers are outraged with surging food prices. The current economic situation is actually very drastic. In Ukraine an average pensioner receives around $100 per month. Given rising food prices, a large number of the elderly Ukrainians find themselves below the poverty threshold.


Furthermore, the protectionist policy hurts domestic farmers. The cash-strapped farmers are forced to sell their grain at lower than expected prices because the Khlib Investbud company uses its market power to dictate the prices in the domestic grain market. Remaining independent grain traders are fighting over left over crumbs. The Ukrainian government needs to understand that the current protectionist policy hurts both sides of the international trade, exports and imports. Lower profit margins do not allow the cash-strapped farmers to purchase essential machinery and fertilizer that are mostly imported from Russia, Belarus, and USA. Higher food prices forces the domestic consumers to devote a large part of their income towards food items and spend less on other imported goods.


The protectionist policy hurts everyone except the Khlib Investbud that seems to be the only winner from the whole situation. However, any criticism of the current trade policy or questioning the role of the Khlib Investbud is suppressed by the state. The editor of the English-speaking newspaper Kyiv Post, Brian Bonner, went on strike after the Ukrainian government tried to prevent the release of the hotly debated interview with Ukraine’s Minister of Agriculture. So far the Ukrainian government made only two changes to the controversial regulation. In March 2011 the government dropped corn from the original list and increased the total size of the quotas by 1.5 million tonnes to 4.2 million tonnes or 10% of the last year’s harvest.


Of course, I must mention that the Ukrainian government said today that it would replace the grain export quotas with export duties of 9 to 14 %. Replacing export quota with export duties is an old trick. The export duty has the same effect as export quota. The imposed export duties discourage exports, reduce quantity of grain exports, and raise grain prices. By the way, the Ukrainian delegation in the WTO has not yet submitted the official documents about replacement of export quotas with export duties.



It sounds logical that the government replaces quotas with duties now. Since October 2010 the Khlib Investbud backed up by the Grain Ukraine has used its market power to accumulate around 2 million tonnes of grain (5% of the last year’s grain production) at low domestic prices that the company dictated. It gives the Khlib Investbud a handicap that the company can use to compensate the imposed export duties. Other grain exporters have to play by the new rules of game. Moreover, the Khlib Investbud had exported 800,000 tonnes of grain before the government imposed export duties. If you look at the whole situation, it is clear that the Khlib Investbud is still the only winner. They have still robbed the domestic grain market!


The current trade policy signals domestic grain producers and foreign grain traders that the Yanukovych administration sticks to the protectionist policy. It also shows that the government can change policy without any legitimate economic reason at all. Ukraine's economic policy is a puppet in the hands of the Donetsk interest group. The backwardness of the current trade policy undermines Ukraine’s potential economic growth. The current protectionist policy can destroy the agricultural sector of Ukraine. If this policy continues, we will see capital leaving the agricultural sector for other industries. If this outrageous grain robbery is not stopped, the European breadbasket will be completely emptied out for the benefit of a single company. If Ukraine is still a democratic state, the government must explain why the benefit of a single company comes at the cost of the whole nation!


P.S. The edited version will appear in the Ukrainian Weekly.

Legal Fusion: Annotated Codebook of Ukraine’s Agriculture

Here is my op-ed in the Kyiv Post.

Ukraine's Land Reform in Cartoons

Here is my Op-Ed/cartoon in the Kyiv Post: http://www.kyivpost.com/news/opinion/op_ed/detail/102164/

The Aid Workers Really Help Ukraine

The Economist had a very interesting piece about an impact of international remittances (e.g. MoneyGram, Western Union) on economic development. The main point of the article was that migrant workers send more money back home than their countries receive in foreing aid. Ukraine seems to be the case too. If you look at the following graph, you can see that the remittances (measured in current US dollars) reached almost $6 billion in 2008. FYI, the total amount of foreign aid that Ukraine received between 1991 and 1999 was only $4 billion (current US dollars). After adjusting for inflation, Ukraine received $5,2 billion in foreign aid between 1991 and 1999 (I used BLS's CPI data). An annual amount of international remittances still exceed an amount of foreing aid that Ukraine received in almost ten years!

Russia and USA House More Inmates than All European Countries Combined

The Pew project has very interesting data on incarceration per capita. USA houses more inmates than the top 35 European countries combined. Russia is in the second place. Another interesting fact is that the top ten, except USA, represents the former Soviet countries. Also, I am surprized that dwarf-countries like Georgina, Estonia, Latvia, and Lithuania are in the top ten. What are the causes? It could be that the FSU countries and USA have higher crime rate than European countries. It could be that the law and enforcement is more effective in the former Soviet countries and USA. I doubt it.
Here is a link: http://rortybomb.wordpress.com/2010/09/29/pew-economic-mobility-project-incarcerations-effects-on-economic-mobility/

Ukraine's Macroeconomic Situation

Here is a snapshot of data taken from the EBRD's Macroeconomic Indicators. The 2007-2009 recession had a devastating effect on Ukraine's economy. GDP dropped by 15.1%, unemployment reached 8.1%, consumer prices increased by 15.9 % and producer prices increased by 6.5%. Ukraine's external debt grew from 56.4% to 91.7% of its GDP. Ukraine's internal government debt increased from 19% to 31.3% of its GDP. 

I am always amazed how politics distorts a macroeconomic reality. If I cranked up my credit cards to 150% of my annual income, who would give me a loan? I cannot think of anyone except the Lehman Brothers. Oops, they are out of the business. 
Why should it be different with countries? The Ukrainian government is negotiating another loan with the IMF. By the way, the government has already received a $15.1 billion loan in August 2010. The IMF's website says that "the IMF’s Executive Board has approved a $15.1 billion loan for Ukraine to put the country on the path to fiscal sustainability, reform the gas sector, and shore up the country’s banking system." What fiscal sustainability do we talk about here? Did someone look at the currently outstanding size of both internal and external debts of Ukraine? It is not fiscally sustainable now. 
Where do all IMF loans go? Ukraine looks like a black hole that sucks in multi-billion-dollar loans from international charitable organizations like IMF or EBRD. Ukraine and similar countries cannot have the fiscal sustainability until they develop a government accountability. Until then each charitable organization must correct their language by calling their "loan for Ukraine" as "loan for the government". 

Assorted Links

1. The top 20 articles published in the AER (American Economic Review) over the last 100 years.
2. There is no free lunch in our life unless you are looking for a wife from Ukraine.
3. A number of Ukrainians participating in the Green Card Lottery (Electronic Diversity Visa Lottery) reached a new record. 760,000 applications in 2010!

Learn Ukrainian in Ukraine with University of Alberta

If you want to study Ukrainian in Lviv, Ukraine (birthplace of Ludwig Von Mises, distinguished Austrian economist), you should check out the program that University of Alberta (Canada) is running this summer.

Here is a link: http://www.arts.ualberta.ca/~ukraina/study_in_ukraine/ukrainian_through_its_liv/

"The Beverly Hills" of Ukraine: Kharkiv's Rublevka and Public Land Grab.

     I guess that I shall start a new series of stories about a land grab in Ukraine. I am not taking about privatization or eminent domain. I am taking about different schemes that the government officials use to transfer public land into their private ownership. The land grab takes place all over the former Soviet Union area because a rule of law is weak and a system of property rights is insecure.
    I think that it is fair enough to call it a land grab because public land is grabbed rather than purchased or inherited. Since the government officials are the riches of Ukraine or vice versa, they can afford to develop the grabbed public lands into the upscale gated communities like the Beverly Hills in California, USA. Since the first upscale gated community so-called Rublevka was built in Moscow on Rublevsky highway, all similar real estate developments are named after it. 
    Today I would like to talk about Kharkiv's Rublevka. Kharkiv is the second largest city in Ukraine. The two most important people in Kharkiv are the Mayor of Kharkiv, Mr. Kernes, and the Governor of Kharkiv region, Mr. Dobkin. Both government official are members of the presidential Party of Regions aka the regionals. I wrote about a series of conflicts between the City Hall and Kharkivians earlier. But I can see everything in a new light now when the Bureau of Land Management of Kharkiv Region releases a very interesting data. According the BLM, the city of Kharkiv auctioned public land only once in 2008. Back then the City Hall sold 3 hectares or 7.41 acres of land for 28 mln. hryvnia or $3,5 mln. The BLM, however, reports that more than 100 hectares or 247 acres of public land located in the Central Park of Kharkiv (The Gorky Park) are privately-owned and under the real estate development. Well, it is quite a mismatch. So here is a math question:
 Q. Suppose that A sells 7.41 acres of public land to B for $3,5 mln in 2008. How much can A get if A sells 247 acres of public land to B and price of land does not change?
 A. $116,6 mln. (FYI, it is the budget of Kharkiv in 2010).

  Who says that you cannot put a price tag on corruption? Simple math. Simple land grab. People lose favourite recreational spot and the city budget looses millions of dollars while while the government officials enrich themselves. What can I say? I look forward to more math problems from the City Hall of Kharkiv. These guys are math whiz kids.
   Here are the pictures that show the real estate development in Kharkiv's Central Park. The first picture shows the so-called "Kharkiv's Rublevka" gated community in the Gorky Park. The second picture shows a new real estate development adjacent to the Kharkiv's Rublevka. The Kharkivians have already gave a nickname to the new gated community. They call it "New Rublevka". Also, the Kharkivians start referring to their city as the Kernes City.

Here is the YouTube video about a real estate development of the grabbed lands in Kharkiv. It is in Russian. But you should check it out. It shows the maps of the Kharkiv's Rublevka in the Gorky Park.