Ukraine and the Empire of Capital

From Marketisation to Armed Conflict

Yuliya Yurchenko

• Publisher: Pluto Press
• Year: 2017
• Print ISBN: 9780745337371
• eBook ISBN: 9781786801821
• Edition: 1
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

Since 1991, nominally independent Ukraine has been in turmoil, with the Orange Revolution and the Maidan protests marking its most critical moments. Now, its borders are threatened and the civil unrest and armed conflict continue to destabilise the country. In order to understand these dramatic events, Yuliya Yurchenko looks to the country's post-Soviet past in this ambitious analysis of contemporary Ukrainian political economy. Providing distinctive and unexplored reflections on the origins of the conflict, Yurchenko unpacks the four central myths that underlie Ukraine's post-Soviet reality: the myth of transition, the myth of democracy, the myth of two Ukraines, and the myth of 'the other'. In doing so, she sheds light on the current intensification of class rivalries in Ukraine, the kleptocracy, resource wars and analyses existing and potential dangers of the rightwing shift in Ukraine's polity, stressing a historic opportunity for change. Critiquing the concept of Ukraine as 'transition space', she provides a sweeping analysis which includes the wider neoliberal restructuring of global political economy since the 1970s, with particular focus on Ukraine's relations with the US, the EU and Russia. This is a book for those wanting to understand the current conflict as a dangerous product of neoliberalism, of the empire of capital.

1

Per aspera ad nebulae or to market through a hybrid civil war: survival myths of systemic failure

Three years into its deepest crisis since the demise of the USSR, Ukraine is on a brink of yet another Maidan. Weakened by civil armed conflict, corrupt state administration apparatus and paralysed by the excesses of the debt burden, Ukraine’s economy is showing few signs of recovery while it continues to accumulate loans with increasingly draconian structural adjustment requirements. Simultaneously, the living standard, poverty and inequality are at their worst to date. The combination of ill-prescribed market transition reforms, loaned funds mismanagement and misappropriation by the kleptocratic ruling bloc have resulted in a toxic debt dependency that has become a tool for manipulation in the renewed geopolitical confrontation between Russia and the USA/EU. Debt geopolitics in the context of the Deep and Comprehensive Free Trade Areas (DCFTA) negotiations have cost Ukraine its residual de facto sovereignty and at the same time continue to undermine possibilities for stabilisation of the geopolitical order.

Ukraine is stuck in a vice of authoritarian neoliberal kleptocracy with fascicisation tendencies. Further implementation of DCFTA means more austerity, more inequality, more privatisation, and fewer support mechanisms for everyday social reproduction via access to health care, childcare, education, affordable utilities and food. The privatisation of land and re-privatisation of fracking fields also means an ecological catastrophe. The liberalisation on exports of timber to the EU already spells the destruction of Carpathian centuries-old forests for short-term economic gain. Debt has become a geopolitical tool in Ukraine’s foreign relations to be used sparingly by its lenders. Exploration of the post-2013/2014 extremes of foreign debt dependency show that the latter, in the context of the kleptocratic neoliberal regime, has led to an effective erosion of Ukraine’s sovereignty that by now barely hinges upon the dangerous rhetoric of ‘patriotism’, that is, the infusion of right-wing sentiment as a defensive mechanism against any criticism of the shaky oligarchic kingdom.

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

In early 2014, when Ukraine became the frontline story of global media, few understood how pro-European Union association demonstrations had turned into armed clashes. The unprecedented violence that shook the country was alarming in that the extreme destabilisation of the increasingly dispossessed society brought to centre stage the geopolitical contestations that many thought had been left behind in the pre-1989 era. Speculations of a new Cold War, imperialistic clashes, and even looming Third World War flooded the discourse space of mass media, politics and academicians,¹ which more often than not contributed to the misunderstanding of the crisis.²

The conflict did not start with the first bullets fired in Kyiv in the winter of 2014. Putin’s ambitions, Nuland’s leaked cables, Biden’s visits, McCain’s and Tymoshenko’s inopportune NATO comments, and the like have had little power to automatically translate into an armed conflict. The conditions had to be right. The bullets and the rest burst the floodgates of discontent that have been brewing for some 25 years and that were stirred by a set of dangerous myths in and of the post-Soviet space. The myths were a product of minds that were unwilling and often incapable of engaging with the social or economic reality of those whose future they dangerously had the most power to shape. In this book, I show that the story of Ukraine’s degeneration into a hybrid civil and armed conflict is the story of ill-conceived myths used as foundations for real life politico-economic transformation and the dangers that that process entails. All myths are social constructs, which are created by people and exist for their specific purpose.³ The underlying purpose and effects of the myths that have been shaping Ukraine’s transformation since 1991 are the securing of expansion of the empire of transnationalising capital. It is precisely the social effects of that complex process that have produced conditions where the civil confrontation and the armed conflict became possible and it is the investigation of that process that is the task of this book.

The function of myths in a changing political and economic reality is to produce social cohesion, support, or – in the words of Gramsci⁴ – to a specific mode of governance, production and social reproduction. The mode that since the 1970s has underpinned the global political economy is that of neoliberalism or financialised capitalism, which since the financial crisis of 2007–2008 and the ensuing recession has only become further entrenched,⁵ and has been assuming overtly authoritarian features.⁶ The most prominent aspect of the latter are the ongoing financialisation and enclosures,⁷ that is, the privatisation of publicly owned assets and the assaults on social welfare provision. Market-based constitutionalism is the new world order⁸ where we see the socialisation of corporate losses⁹ combined with extreme disciplining in the workplace¹⁰ and systemic social exclusion of labour¹¹ with added extortion by indebtedness,¹² in-work poverty¹³ and austerity policies. All of the above are popular and successful exports from the core of the capitalist system to its semi-/peripheries to which Ukraine is no exception, as I will show in this book.

The expansion of the global capitalist system to the post-Soviet space since the early 1990s has created a pronounced intensification of transnational class struggles and East–West geopolitical tensions – primarily between the USA and Russia. Weakened by the demise of the USSR and later economically strengthened by the industrialised world’s dependence on oil and gas, Russia became a state-run oligarchy that entered into a new competition with the USA, this time without a proper ideological component. Since the late 1990s, the Kremlin’s aim has been to beat the USA at their own game, the capitalist competition/world dominance game; that has included, among other aspects, economic, political and military control over the post-Soviet states, which were slipping away from Moscow’s gravitational pull one after another. The Commonwealth of Independent States (CIS; founded in 1991), the Collective Security Treaty Organization (CSTO; founded 1992, reformed in 2002), and the more recent formation of the Eurasian Customs Union in 2008 are some of the examples of Russia’s attempts to re-establish and maintain dominance over the space it often used to control directly, even before the formation of the USSR. The USA’s push to spread NATO to Eastern Europe and Russia’s military involvement in Transnistria and Abkhazia are also part of the Washington–Moscow geopolitical game. The effective manufacturing of frozen conflicts in Moldova and Georgia led some to interpret Putin’s annexation of Crimea and the military incursion into Eastern Ukraine as a reaction to fears over the expansion of NATO too.¹⁴ What advocates of Russia’s right to defend its interests¹⁵ fail to acknowledge is that Ukraine is a sovereign state and that Russia’s disagreement with its foreign and trade policy choices does not grant the Kremlin rights to violate Ukraine’s borders. Nor does it justify the transformation of Russia’s mainstream political discourse that, since the early 2000s, has been based on a bizarre mix of the resurrected and glorified imperial past and reinforced pride over monopolised credit for the Soviet Second World War victory. The use of the imperial history of ‘ownership’ of Crimea combined with the need to protect ethnic Russians as a pretext for military incursion into Ukraine speaks of the Kremlin’s imperialist ambitions: the rhetoric of geopolitical self-defence is hard to sustain in the light of such ‘diplomacy’. And indeed, the imperialist clashes of the West and East extend beyond the post-Soviet states and into the international military and economic arena. The confrontations between Russia and the West/USA over Libya and Syria in the UN are just some of the many illustrations of those clashes and their recent intensification.

The long and complex historical relationship with Russian Empire and the then Soviet Russia secured Ukraine a special place in the renewed geopolitical confrontation. Internally, the state-building process was complicated by the legacy of centuries of being divided between east and west, empires and forms of social organisation intermeshed with brief periods of sovereign statehood.¹⁶ Unified in its current borders by the Soviets in mid-twentieth century, the multi-ethnic, multi-religious, multilingual nation needed a strong cosmopolitan foundation myth to bring it into a sovereign existence.¹⁷ The pivotal principles of the country’s Constitution, adopted in 1996, contained all the required ingredients for that. However, marketisation and geopolitical games in the post-Soviet space were in contradiction with the potential construction of a cosmopolitan, egalitarian society and thus, different, divisive myths were used to shape public imagination. A regime of neoliberal kleptocracy, where typical neoliberal features are exacerbated by omnipresent corruption and institutionalised state asset embezzlement, emerged.¹⁸ The country found itself placed into a vice of neoliberal kleptocracy and intensified geopolitical tensions. The effective dispossession of the masses and the manipulative divisive political myths used to manufacture consent to the regime of dispossession have continuously eroded social cohesion since the early 1990s.

Complex and far-reaching historical processes do not simply happen. There are social forces and people with names who drive them in specific directions. It is through the identification of those forces and the identification of their main interests that we can understand the reasons behind their strategic choices, however questionable those may appear – as at first it may seem to be in the case of Ukraine. One must look into the relationships between the systemic transformation of Ukraine as a part of the changing global capitalist system, associated geopolitical shifts and the class formation process, for example, the emergence of oligarchy, on the level of ideology and the changing individual material positioning towards the means of production in the process of privatisation, that is, accumulation by dispossession.¹⁹

In this book, I show how the problematic integration of Ukraine into the global capitalist system has fertilised internal political destabilisation, while simultaneously fuelling geopolitical tensions in the region, thus making the civil and armed conflict possible. The abstract separation of civil and armed conflicts is crucial here as political divisions are currently as rife in the country as are their armed expressions, while civil–political conflicts exist on and extend beyond the frontline of Eastern Ukraine.

THE EMPIRE OF CAPITAL, SOCIAL FORCES AND METHODS OF INQUIRY

The end of the Golden Era of capitalism in the late 1960s–early 1970s opened the door for the laissez-faire economy once more. ‘The revenge of the rentier’,²⁰ earlier ‘euthanised’ by the economic theories of John Maynard Keynes,²¹ was imposed to overcome the limits of the possibility that the mass production/mass consumption based post-Second World War regime of ‘embedded liberalism’²² had by then been reached. Declining profitability, stagflation and the increased labour militancy²³ of the late 1960s–1970s in the USA and Great Britain was met with monetarism, business re-regulation²⁴ and neoliberalism, more generally speaking. Founded on the economic theories of Friedrich von Hayek (1899–1992) and Ludwig von Mises (1881–1973) and an update to nineteenth-century liberalism, neoliberalism was ‘a consequence of incorporation of marginalist economic thought … with critiques of equilibrium theory’.²⁵ The outcome rested on two tenets drawn from von Mises and Hayek respectively: (1) that ‘egoism is the basic law of society’²⁶ and (2) that ‘free markets lead to “spontaneous order” that solves the problem of economic calculation’.²⁷ It became a ‘theory of political economic practices that proposes that human well-being can be best advanced by liberating individual entrepreneurial freedoms and skill within an institutional framework characterised by strong private property rights, free markets, and free trade.’²⁸ Crucially, neoliberalism was conceived as an ideological theory-project aimed to counter ‘the inherent totalitarianism of collectivist and state planning of the economy drawing on economic theories which, in turn, posited the impossibility of economic planning in the first place.’²⁹ The irony here is that neoliberal distaste for planning is but declaratory and often selective as austerity politics, the redesigning of the international trade architecture and the demands for Structural Adjustment in low- and middle-income countries loudly testify. Both nationally, and globally, neoliberalism roots itself through the institution of the state as the main legislative authority capable to legitimately perform such rooting. Thus, the state is assigned a role ‘to create and preserve an institutional framework appropriate [for neoliberal] practices’.³⁰ This transformation gave rise to what Robinson calls the ‘transnational state’³¹ – a key change of the recent decades that involves the extension of existing and the creation of new mechanisms for lessening state control on capital, while tightening control on labour in terms of regulations and taxation. The state itself is a terrain of class struggle, where the dominant classes and their fractions tend to determine its strategic direction;³² in a transnational state, the transnationally orientated f...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures and Tables
• List of Abbreviations
• Acknowledgements
• Preface
• Map of Ukraine
• 1. Per aspera ad nebulae or to market through a hybrid civil war: survival myths of systemic failure
• 2. Capitalist antecedents in the late USSR
• 3. Social destruction and kleptocratic construction of the early 1990s
• 4. Class formation and social fragmentation
• 5. Neoliberal kleptocracy, FDI and transnational capital
• 6. ‘Two Ukraines’, One ‘Family’, and geopolitical crossroads
• 7. The Bloody Winter and the ‘Gates of Europe’
• 8. Geopolitics, the elusive ‘Other’, and the nebulous telos of Europe
• Notes
• Bibliography
• Index