Category Archives: Ukraine

A Lesson for America in Poland’s Rise and Ukraine’s Fall

A pity that many Americans do not seem to have the ability to connect these dots.
By Phil Gramm and Michael Solon

“As President Obama is learning, no political victory is permanent without economic success. Consider the fates of two former Soviet vassals.”

In forging Turkey out of the ruins of the Ottoman Empire, Mustafa Kemal Atatürk warned his countrymen in 1923 that all they had accomplished hung in a most tenuous balance: “No matter how great they are, political and military victories cannot endure unless they are crowned by economic triumphs.” Ninety years later, Atatürk’s wisdom applies not just to Turkey at its inception but to all people, in all times, who seek to win and preserve freedom and independence.

There is no better modern example of the power of an economic triumph than the experience of Ukraine and Poland in the post-Cold War era. With the fall of the Berlin Wall and the collapse of the U.S.S.R., both nations—which emerged from Soviet domination with virtually identical economic and political systems—suddenly faced the rarest of Central European conditions: independence.

Ukraine has largely squandered its economic potential with pervasive corruption, statist cronyism and government control. With budget deficits as high as 14.4% of GDP, hyperinflation and an underground economy approaching 50% of all economic activity, Ukraine’s economy since 1992 has grown about one-fifth as much as the economy of its smaller neighbor Belarus. The per capita income of Ukraine, in U.S. dollar equivalence, has grown to only $3,900 in 2013 from a base of $1,570 in 1990.

Today, the whole world is painfully aware that Ukraine’s economic failure has endangered its freedom and independence, and forced it to courageously fight for both.

By most conventional measures, Ukraine should be a wealthy country. It has world-class agricultural land, it is rich in hydrocarbons and mineral resources, and it possesses a well-educated labor force. Yet Ukraine remains poor, because while successful Central European nations have replaced their central-planning institutions with market-based reforms, Ukraine has never been able to break the crippling chains of collectivism. Only now is Ukraine seriously attempting to limit government, control spending, stop the growth of its national debt, and stabilize the value of its currency.

These are reforms that Poland instituted almost a quarter of a century ago, and dramatically transforming its economy. By employing free-market principles and unleashing the genius of its people, Poland has triggered an economic triumph as per capita GDP, in U.S. dollar equivalence, soared to more than $13,432 by 2013 from $1,683 in 1990. Today Poland is the fastest-growing economy in Europe. Its economic success and democratic reforms have earned it European Union membership, and Poland’s once fleeting sovereignty is now anchored in NATO.

The man largely responsible for Poland’s transformation is Leszek Balcerowicz, the former finance minister who was later governor of Poland’s Central Bank. In transforming a nation from a state-based collectivist economy to a market-oriented economy, Mr. Balcerowicz in 1989 had no manual to read or modern example to follow.

He faced two choices: act boldly using what he called “shock therapy” or act slowly and incrementally. Bold action had little chance of success but incrementalism had no chance of success. As Mr. Balcerowicz put it, “a very risky option is always better than a hopeless option.”

The concept of free markets was foreign to the Polish people, but Mr. Balcerowicz understood that economic freedom was a necessary condition for prosperity and, ultimately, for the preservation of political freedom and national independence. The Balcerowicz Plan was built around permitting state firms to go bankrupt, banning deficit financing, and maintaining a sound currency. It ended artificially low interest rate loans for state firms, opened up international trade and instituted currency convertibility.

His plan was signed into law on December 31, 1989 and within days, inflation—which had reached an annual rate of 17,000%—started to plummet. Poland pegged the value of the zloty to the dollar, permitting redenomination of the zloty five years later by crossing out four zeros. Once the reforms were in place, goods started showing up first in the trunks of cars, then in street stands, in small shops and ultimately in large stores. A miracle transition was under way and the rest is history.

By crowning its great political victory in achieving independence with economic triumph, Poland has established itself as a Western nation. Whereas the people of Ukraine are divided by language and heritage, in Poland people are united by prosperity and a shared hope for the future. By using its political victory to remake its economy, Poland created the prosperity that has strengthened and solidified its freedom and independence.

Atatürk’s dictum is a warning that without economic growth and prosperity, political and military victories can be transient and historically inconsequential. President Obama has won historic political victories. ObamaCare, the Dodd-Frank financial reforms, the largest stimulus program in American history and the most pervasive expansion of regulatory authority in three quarters of a century largely fulfilled a progressive agenda that predated the 20th century. While Mr. Obama has transformed American society, his program has failed to produce an economic triumph, a failure that a free society will not long tolerate.

The Reagan program, begun in the early 1980s, dominated the economic policy of America for a quarter century because it produced broad-based prosperity in what now seems to have been a golden age. While the Reagan program has been largely repealed, in the midst of the current failed recovery the memory of its success burns ever more brightly.

But more than it needs memories, America needs a new generation of leaders who are ready, as Ronald Reagan and Leszek Balcerowicz were, with a plan of action when America turns again—as it inevitably will—to the system of freedom and opportunity that made us the greatest nation in the history of the world.

Mr. Gramm, a former Republican senator from Texas, is senior partner of US Policy Metrics and a visiting scholar at the American Enterprise Institute. Mr. Solon, a former adviser to Senate Minority Leader Mitch McConnell, is a partner in US Policy Metrics.

Phil Gramm and Michael Solon: A Lesson for America in Poland's Rise and Ukraine's Fall – WSJ.


Matthew Kaminski: The West Leaves Ukraine to Putin –

With friends like the USA, who needs enemies?
Updated April 14, 2014 5:39 a.m. ET
Kiev, Ukraine

‘We’re the chosen generation,” says Arseniy Yatsenyuk, Ukraine’s interim prime minister. He’s referring to all those who made this winter’s European revolution. For the first time since 1654, when Ukrainian Cossacks formed a fateful alliance with Moscow against Polish rulers, Ukrainians are heading back West.

Their timing is terrible. Two decades ago, when the Berlin Wall fell, the West embraced another generation of Eastern Europeans. Ukraine has gotten a different welcoming committee. An economically feeble European Union gorges on Russian energy and dirty money while lecturing Ukraine on Western values but refusing to defend it. Asking for Washington’s help against Russian attack, Kiev finds a man “chosen” in the past two presidential elections to get America out of the world’s trouble spots.

Vladimir Putin sees a West made soft by money, led by weak men and women, unwilling to make sacrifices to defend their so-called ideals. In the Ukrainian crisis, the image fits. Russia’s president is many things, but most of all he is resolute. He took the EU and America’s measure and annexed Crimea last month at minimal cost. Ignoring Western pleas for “de-escalation,” Russia this weekend invaded eastern Ukraine. Just don’t look for video of T-72 tanks rolling across the borders, not yet at least.

Russian intelligence and special forces on Saturday directed local crime bosses and thugs in coordinated attacks on police stations and other government buildings in towns across eastern Ukraine. These men were dressed and equipped like the elite Russian special forces (“little green men,” as Ukrainians called them) who took Crimea. Ukrainian participants got the equivalent of $500 to storm and $40 to occupy buildings, according to journalists who spoke to them. Fighting broke out on Sunday in Slovyansk, a sleepy town in the working-class Donbas region that hadn’t seen any “pro-Russia” protests. A Ukrainian security officer was killed.

Kiev is on a war footing. Radio commercials ask for donations to the defense budget by mobile-telephone texts. The government’s decision to cede Crimea without firing a shot cost the defense minister his job and wasn’t popular. Western praise for Ukrainians’ “restraint” got them nothing. The fight for Ukraine’s east will be different.

This invasion was stealthy enough to let Brussels and Washington not use the i-word in their toothless statements. The EU’s high representative, Catherine Ashton, called herself “gravely concerned” and commended Ukraine’s “measured response.” There was no mention of sanctions or blame. The U.S. State Department on Saturday said that John Kerry warned his diplomatic counterpart, Russian Foreign Minister Sergei Lavrov, that “if Russia did not take steps to de-escalate in eastern Ukraine and move its troops back from Ukraine’s border, there would be additional consequences.”

By now, the Ukrainians ought to have seen enough to know that they’re on their own. Moscow has reached the same conclusion. These perceptions of the West are shaping events.

A month ago, the EU sanctioned 21 marginal Russian officials and quickly tried to get back to business as usual. On Friday, the U.S. added to its sanctions list seven Russian citizens and one company, all in Crimea. What a relief for Moscow’s elites, who were speculating in recent days about who might end up on the list. Slovyansk fell the next day.  Any revolution brings a hangover. Ukrainians expected problems: an economic downturn, some of the old politics-as-usual in Kiev, including fisticuffs last week in parliament, and trouble from Russia. Abandonment by the West is the unexpected blow. Hundreds of thousands of Ukrainians fought, and 100 died, for their chance to join the world’s democracies.

As an institution, the EU always found excuses to deny Ukraine the prospect of membership in the bloc one day. But Bill Clinton and George W. Bush never recognized Russian domination over Ukraine. Billions were spent—Kiev was the third-largest recipient of U.S. aid in the 1990s—and American promises were made to protect Ukraine’s sovereignty. In return, Ukraine took active part in NATO discussions and missions, sending thousands of troops to the Balkans and Iraq.

When Russia invaded Crimea and massed 40,000 or more troops in the east, Ukraine turned to an old friend, the United States, and asked for light arms, antitank weapons, intelligence help and nonlethal aid. The Obama administration agreed to deliver 300,000 meals-ready-to-eat. As this newspaper reported Friday, military transport planes were deemed too provocative for Russia, so the food was shipped by commercial trucks. The administration refused Kiev’s requests for intelligence-sharing and other supplies, lethal or not.

Boris Tarasiuk, Ukraine’s former foreign minister, barely disguises his anger. He says: “We’ve not seen the same reaction from the U.S.” as during Russia’s 2008 attack on Georgia. U.S. Navy warships were deployed off the Georgian Black Sea coast. Large Air Force transport planes flew into Tbilisi with emergency humanitarian supplies. But who really knew for sure what was on board the planes? That was the point. Russian troops on the road to the Georgian capital saw them above and soon after turned back. The Bush administration dropped the ball on follow-up sanctions but may have saved Georgia.

By contrast, the Obama administration seems to think that pre-emptive concessions will pacify Mr. Putin. So the president in March ruled out U.S. military intervention in Ukraine. Maybe, but why say so? Late last month at a news conference in Brussels, Mr. Obama also openly discouraged the idea of Georgia or Ukraine joining NATO.  The next diplomatic “off ramp” touted by the Obama administration will be the negotiations involving Russia, Ukraine, the EU and the U.S. scheduled for later this week. Petro Poroshenko, the leading Ukrainian presidential candidate, tells me that these “talks for the sake of talks” send “a very wrong signal” about the West’s commitment to sanctions. It’s a case of the blind faith in “diplomacy” undermining diplomacy. See the Obama record on Syria for the past three years.

The West looks scared of Russia, which encourages Mr. Putin’s bullying. But on the Ukrainian side, the sense of abandonment brings unappreciated consequences. Ukraine’s political elites have taken into account that Russia could reimpose its will—perhaps that anticorruption law demanded by the EU isn’t so necessary after all?  While millions of Ukrainians have united against Russia, out in the east of the country many people are fence-sitters. The fight there, as in Crimea, won’t be over any genuine desire to rejoin Russia. Before last month, polls in Crimea and eastern Ukraine put support for separatists in single digits. But the locals’ historical memory teaches them to respect force and side with winners. Left to fend for itself by the West, Ukraine looks like a loser to them, notes Kiev academic Andreas Umland.

The U.S. Army won’t save Slovyansk. But Ukraine expects and deserves America’s support by every other means that Washington has refused so far. Betrayal is an ugly word and an uglier deed. Europe and the U.S. will pay dearly for it in Ukraine.

Mr. Kaminski is a member of the Journal’s editorial board.

Matthew Kaminski: The West Leaves Ukraine to Putin –


Putin Acts, Obama Assesses

Aren’t you glad we have such a reflective President?
The White House on Monday said there was “overwhelming evidence” that Russia is stirring the unrest in eastern Ukraine, but President Obama hasn’t yet decided if further sanctions are warranted. That’s how the Associated Press put its dispatch from Washington on the crisis in Ukraine, and the juxtaposition is a perfect summary of the current state of U.S. foreign policy.

Vladimir Putin uses Russian special forces to cow a neighbor and steal territory, while Mr. Obama agonizes about what to do. “We are actively evaluating what is happening in eastern Ukraine, what actions Russia has taken, what transgressions they’ve engaged in,” White House spokesman Jay Carney said. “And we are working with our partners and assessing for ourselves what response we may choose.” This is from the same President who has been saying for weeks that any further Russian transgressions into Ukraine would be met with harsh sanctions. Mr. Putin must laugh out loud when he reads this stuff.

Meanwhile, the government in Kiev is getting the message that it had better fend for itself and has begun to meet one of the offers from Mr. Putin that it can’t refuse. Acting President Oleksandr Turchynov said he is now open to a national referendum that would grant greater autonomy to regions of the country. Mr. Putin wants to hive off eastern and southern Ukraine into what would essentially be a Russian protectorate and leave Kiev with a rump state. The U.S. has refused to send Ukraine lethal military aid, and Kiev may be looking to sue for peace to avoid an outright invasion.

We know Mr. Obama didn’t run for President to engage in great power politics, but it is still part of the job description. Is he still interested in doing his job?

Putin Acts, Obama Assesses –


Cold War 2.0, the Videogame

“..we let it go…”
We are close to the Putin endgame in Ukraine. On Wednesday troop-filled trucks flying Russian flags were seen in eastern Ukraine’s cities. The politically fractured and under-trained Ukrainian military sent toward Donetsk and other cities this week is no match for the camouflaged special-ops forces Russia has there, or the 50,000 Russian troops and fighter jets near the eastern border.

The West didn’t lose Ukraine, an independent nation of 45 million people. It simply let it go. According to this newspaper Tuesday: “The White House reiterated that no lethal assistance was planned” to help Ukraine defend itself. The U.S., however, did send ready-to-eat meals. White House Press Secretary Jay Carney’s comments were antiseptic: “The Ukrainian government has a responsibility to provide law and order.” It is fitting that churchgoers the world over this week are hearing the story of Pontius Pilate.

That the historic implications of Russia’s re-subjugation of Ukraine seems to be largely an abstraction to the current president of the United States is no surprise. Recent American Ambassador to Russia Michael McFaul has called this confrontation Cold War 2.0. But this implies one understands what Cold War 1.0 was.

When the Soviet Union’s tanks rolled into Hungary in 1956, Barack Obama wasn’t born. He was seven when the Soviets invaded Czechoslovakia in 1968. He may be president, but he isn’t alone.

In Western Europe and the U.S., the Cold War, which lasted from 1947 until 1991, is barely taught in schools. It’s just a phrase for most of the young and a dimming memory for others. The West’s intellectuals often diminish the significance of the Cold War. They say it didn’t matter much, that the Soviet Union unwound on its own. No small number of these thinkers were half-sorry to see this “flawed” experiment in income-equality fail.

Now some of the same arbiters of history are saying the conflict in Ukraine is the West’s fault, again. What drove Mr. Putin into Georgia, Crimea and Ukraine was the needless historic hurt the West did to Russia’s vestigial interests by expanding NATO’s membership eastward.

Let’s look at what the phrase “expanding NATO’s membership” means. In 1999, Poland, Hungary and the Czech Republic joined NATO. In 2004, it took in Lithuania, Estonia, Latvia, Bulgaria, Slovakia and Romania. That list is fraught with historic significance. These are the nations that Winston Churchill in 1946 named the Iron Curtain countries. All were communist and all inside—another antiseptic phrase—the Soviet Union’s “sphere of influence.”

If you tried to leave an Iron Curtain country, you could be imprisoned or shot. It may be that Cold War 1.0 was in large part about the nuclear standoff between the U.S. and Soviet Union, but for the tens of millions who lived in Eastern and Central Europe, it was about 50 years of paranoia, imprisonment, shattered careers, moral compromises and daily obeisance to the Soviet Union, aka Russia. Whenever one hears that we in the West have been unmindful of Mr. Putin’s “historic” interests in Ukraine, one wants to suggest for further reading Alexander Solzhenitsyn’s “The Gulag Archipelago” or Vaclav Havel’s “The Power of the Powerless.”

The dictators who ran the so-called Eastern Bloc countries for the Soviets had names like Ceausescu, Honecker, Jaruzelski, Hoxha and Kadar. It seemed as if they would rule behind their Iron Curtain forever because the Red Army to the east had their backs. Then in the 1970s, a determined internal opposition developed. They had names like Havel, Walesa and Wojtyla. Karol Wojtyla became Pope John Paul II, called “the Polish pope” because he fought there against the unfree society designed by Vladimir Putin’s predecessors.

Now the battle for Ukraine is ending without much more than a yawn in Washington, London, Paris and most ironic of all, the Berlin that the Cold War divided in two. In 1947, President Harry Truman, a Democrat, began a year-long allied airlift to supply Soviet-occupied and isolated Berlin. The Berlin airlift broke the blockade. Nobody running the West would do that now.

After the Berlin Wall fell in 1989, the Iron Curtain countries chose to be democracies and turned to the West. Now, 25 years later, Vladimir Putin has demolished democracy in Russia and is proposing Potemkin-village votes in Ukraine held under the barrel of a gun.

Earlier this month, Poland’s prime minister, Donald Tusk, said, “If there is a thing such as NATO’s border that needs diligence it would be Poland’s eastern border.” He knows that pressure from his neighbor in the east will come after Ukraine. What remains of NATO now is a good question. Mr. Putin gave his answer in Ukraine.

The post Cold-War West stands un-led by the American president. Vladimir Putin famously believes the U.S. and Western Europe in 2014 are filled with self-indulgent populations who can barely lift their eyes from an iPhone screen to see a European nation swallowed. Yes, it does look like Cold War 2.0. The videogame.

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Henninger: Cold War 2.0, the Videogame –