Reflecting on my 2021, and lessons for Ukraine: Part 3

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Reflecting on my 2021, and lessons for Ukraine: Part 3

Part III

In this final part of the essay series (again, if you have not yet read the first and second parts, I highly recommend that you do so), I will explore the issue of foreign aid and conditionality, and how arguments made in the relevant works might be used by external actors to help Ukraine reform.

Challenges

Closely related to the issue of corruption and state capture covered in Part II is that of flawed foreign aid and conditionality. The international community has been actively involved in Ukraine’s domestic reforms for most of its independent history, so understanding the successes and pitfalls of external involvement is arguably crucial to getting the reform process right.

Ukraine has been receiving IMF and EU funding and loans intermittently since 1994, yet it is unclear how much progress this has yielded, if it has at all. Perhaps one of Ukraine’s most successful pre-2014 periods of reform occurred under the 1999-2001 Yushchenko government, precisely when the IMF withheld funding and the state was on the brink of default. By contrast, when the state was once again in dire fiscal straits, the first Azarov government (2010-2012) implemented half-hearted reforms in return for a tranche of IMF loans, but backtracked once the economic situation had settled. Even after 2014, Ukraine’s relations with the IMF have not always been on the best of terms, as President Zelensky has received warnings from the IMF that backpedalling on judicial reform could lead to the suspension of loans.

As regards the EU, it has pushed hard on Ukraine to implement judicial reforms, especially in the realm of judicial independence. This independence has, however, enabled corrupted judicial institutions, such as the High Qualifications Commission of Judges (HQCJ) and Constitutional Court (CCU), to overturn landmark anti-corruption reforms. In light of these challenges, it is of the essence that domestic and external actors alike identify their root causes and how best to remedy them.

Lessons and Policy Recommendations

A crucial lesson that can be drawn from Ukraine’s historical experience and the works cited is that EU and IMF conditionality ought to focus on the underlying political causes of poor governance, rather than their symptoms. This conditionality should be narrow, as it makes the distinction between compliance and non-compliance clearer and will allow reformers in Ukraine to concentrate their political capital where it matters most. Where possible, conditionality should also focus on outputs, that is, the substantive and informal rather than the procedural and formal elements of politics. This might (and should) include elements from the policy recommendations in Part II regarding state-society relations.

With regard to the IMF, there is an inherent contradiction between its mandate of short-term illiquidity relief and hard budget constraints which might instil fiscal responsibility in the Ukrainian government. Put differently, IMF lending might pose a moral hazard. If it is not the appropriate institution for developmental conditionality (more on that below), IMF aid can be made conditional on the successful implementation of long-term conditions set by, for instance, the World Bank or the EU. The precise institutional set-up and format of this aid can be determined by the IMF and reform partners in Ukraine.

Meanwhile, the EU’s conditionality has traditionally focused on the adoption of EU-style laws with little regard for the fact that it is not Ukraine’s absence of laws that hampers reform, but the inability to implement existing laws due to the dominance of informal networks over formal law in the Ukrainian political system. This is most evident in the case of judicial independence, where the EU’s (as well as Ukrainian domestic actors’) preoccupation with institutional autonomy led it to overlook the importance of reforming the institutions themselves. Consequently, Ukrainian judicial institutions, such as the HQCJ and the CCU, have on numerous occasions made rulings that ran counter to the public interest. This was put on stark display by the CCU’s October 2020 decision to invalidate the National Agency on Corruption Prevention’s (NACP) competency in monitoring asset declarations. Institutional and bureaucratic independence is crucial to effective exercise of state power and the rule of law, but beyond a certain point it allows corrupted internal interests to act unchecked.

Moreover, the EU should back up conditionality politically with concrete promises of membership, or be honest about its inability to do so and offer institutionalised alternatives. Stricter conditionality and clear membership prospects ought to be tempered by flexibility on the part of the EU, however. This may sound contradictory at first, but as I hope to argue below, this is not necessarily the case.

Ivan Krastev and Stephen Holmes argue compellingly in The Light that Failed (2019) that the current rise of populism in Poland and Hungary can in large part be explained by the EU’s neoliberal and technocratic approach to politics which made Poles and Hungarians feel that European policies were imposed on them. One could say that Poland and Hungary have nobody to blame but themselves, that it was their choice to try to enter a club whose rules they had to follow in order to qualify. But while this is true, it does not invalidate legitimate criticisms of the EU’s flawed policymaking or the fundamental truth that any policy will enjoy broader legitimacy if it is seen as having originated domestically through deliberative and consensual processes.

This is relevant to the case of Ukraine because although the EU and US have been experiencing “Ukraine fatigue” as a result of the local government’s inconsistent record on reform, Ukrainians themselves also feel increasingly frustrated with what they see as the EU’s half-hearted commitment to Ukrainian EU membership. For all of Ukraine’s problems with corruption and poor leadership, I can’t say that I disagree with this sentiment. While there is little danger that Ukraine will ever return to a more pro-Russian orientation, the EU should not exploit this vulnerability and squander its soft power on endlessly stringing Ukraine along with mere insinuations of membership.

Making clear to Ukraine that it will become a member once it satisfies certain conditions will therefore help prevent the populist scenario from repeating itself there, as it will place the onus to follow through with reforms on Ukraine and provide Ukrainian elites and society with a greater sense of ownership over European integration. One constructive approach, for instance, would be for the EU to define the ultimate aims of reforms in terms of their substance and functions as opposed to procedure, while maintaining dialogue with Ukrainian public institutions and civil society and leaving it to the latter to decide how to attain those aims. This could even take the form of a two-stage accession process whereby Ukraine first achieves the substance of reforms elaborated with the help of the EU – what might be termed “European ends by Ukrainian means” – before implementing the acquis communautaire once corruption has been brought under control and public institutions have reached sufficient capacity.

One issue that is crucial to this process (and which I would love to learn more about and to cover in a future essay) is with whom precisely the EU will be negotiating and conducting a dialogue on reform and accession. The inclusion of civil society is widely acknowledged as necessary for the success of future initiatives – an example in this regard is the participation of members of Ukrainian civil society and international experts in the selection process of potential candidates for the judiciary – but this has implications for traditional conceptions of sovereignty which see governments as the sole legitimate representatives of the public as a whole on the international stage.

Given many EU Member States’ ambivalence about further enlargement – as well as issues in Ukraine’s bilateral relations, such as tensions with Hungary over the Hungarian national minority in Zakarpattia – this policy area will likely remain a sticking point for some time to come. From Ukraine’s end, the best thing it can do is push forward with reforms, which will help persuade partners in the EU that it has what it takes to become a member.

Conclusion

Throughout this essay, I have tried to outline some of the main challenges Ukraine faces on its road to political and economic development, and how we can apply the lessons of the political development literature to address some of these. Assuming we can even define what the finish line is, Ukraine unfortunately still has quite a ways to go. But Ukrainian society’s work following the Revolution of Dignity has already yielded significant progress towards the country’s attainment of liberty and prosperity, and ensures that the blatantly corrupt and authoritarian depredations witnessed under Yanukovych will never again be tolerated. I hope you’ve enjoyed this, and thank you for reading.