You're reading: Economist Acemoglu: Ukraine can achieve 40-percent economic growth, but it won’t be easy

Shortly after taking office, Ukraine’s new prime minister, Oleksiy Honcharuk, promised to achieve 40-percent economic growth in the next six years. It’s a plan few could oppose. But is it realistic?

Daron Acemoglu, an economics professor at the Massachusetts Institute of Technology, says the goal is indeed achievable. But that doesn’t necessarily mean it will be achieved.

The co-author of the 2012 bestseller “Why Nations Fail” spoke with the Kyiv Post on the sidelines of the Yalta European Strategy forum in Kyiv on Sept. 14. He said Ukraine has plenty of potential, but also faces serious challenges.

“Ukraine has underperformed so badly for three decades, and on paper it has almost all prerequisites for economic growth: an educated workforce, diversified economy, a location in conjunction with the EU and the U.S. and former Soviet countries,” Acemoglu told the Kyiv Post.

At the same time, the prime minister’s goal will be extremely difficult to achieve.

“The statements that bother me more (than Honcharuk’s) are that it is easy. Ukraine tried and failed several times before. Economic growth goes together with changing institutions and (the) mindset, changing the legal system and fighting corruption,” Acemoglu said.

Increasing accountability

Ukraine ranks 120th out of 180 countries in the Corruption Perception Index, making it the most corrupt country in Europe. And perceptions, as well as the mindset of the people and businesses, are difficult to change, the economist says.

To boost growth, Ukraine should “make politicians and the bureaucracy more accountable to the people,”Acemoglu believes.

“But this is a phenomenally hard thing to do,” he said. “If anyone has any illusions that dealing with corruption will be easy, (he or she) has to abandon them.”

And the growth rate isn’t the only way to measure the government’s success.

Another measure of success would be increasing judicial efficiency — specifically, reducing the time a case takes to process in court and increasing bureaucratic efficiency by providing public services through new technology.

Inequality

In 2017, the World Happiness Report’s Inequality Index, which is based on a measure called the Gini index, named Ukraine among the most equal countries in the world alongside Slovenia and Norway.

For many people living in Ukraine, this is difficult to believe. Ukraine still possesses an economy in which a large number of resources are concentrated in the hands of oligarchs. According to Acemoglu, this leads to inequality of opportunity for each citizen. This then creates inequality of socio-economic outcomes.

But the Gini index fails to reflect this due to another problem that is endemic to Ukraine: much wealth is held in the shadows.

“In Russia, there was a study that showed some huge fraction of people driving very (high-end) models of Mercedes and BMWs had taxable incomes less than half the price of their cars,” he said. “Bad news for Ukrainian. Ukraine is more similar to Russia that it wants to be.”