Excellent article on the fallacy of the middle class in #Venezuela and how the current situation is eerily similar to 1989, with a huge discrepancy between the expectations of the people and the current economic reality.

Cadivi dies, and so does the middle class

(Since Cadivi is gasping its final breaths surrounded by controversy and not a minute too soon, this guest post by Iesa professor Pedro Luis Rodríguez could not be better timed. Rodríguez takes on Javier Corrales’ assertion that we’re mostly middle class, and concludes that it was all a mirage. Take a read and let us know how you view this debate)

Venezuela’s Middle Ground: now you see it, now you don’t

In a recent article in Foreign Policy, Javier Corrales argues that Venezuela today is a country of “mostly middle-class people”. Following the World Bank’s income thresholds for determining class membership, Corrales classifies each income decile in Venezuela into their respective class.

I’ve replicated his table following the guidelines in the appendix to his article (see Table 1). It is evident, as Corrales highlights, that by this measure in 2012 the majority of Venezuelans belonged to the middle class. Moreover, the distribution differs markedly from 1990 as a result of a large portion of the poor crossing the middle class threshold during the recent windfall (especially post 2005).

Corrales

Corrales correctly points out that once we agree that Venezuela is a middle class country, then deriding the recent wave of protests as “too middle class” is absurd and, in the case of the government, a political blunder. What else would one expect in a middle class country but middle class demands, including demands for better governance outcomes and representation?

The other half of the story

Yet Corrales’ table shows only half the story. In a country highly dependent on oil revenues, defining social progress solely in terms of income is problematic as we run the risk of confusing a temporary increase in consumption, financed with oil revenues, with a permanent increase in welfare. The only way the latter can be achieved is through sustained increases in productivity.

There is little doubt that the oil bonanza of the past decade and the government’s (re)distributive policies increased the income of the poor in Venezuela, swelling the middle class, at least as defined by the World Bank’s income thresholds. But to the extent that these outcomes are not the reflection of increased productivity but rather of increased consumption financed by high oil revenues, they are highly dependent on the incremental (not just continued) flow of this revenue. Once this flow becomes strained, as has been occurring since 2013, the model not only becomes unviable, but its apparent achievements can quickly be wiped out.

To get a sense of what this would entail, I reconstructed Corrales’ table using the World Bank data on GNI in local currency, converting it at the black-market exchange rate and applying the same PPP and inflation adjustment as in table 1 (see Table 2). While at the official exchange rate, Venezuelans’ incomes are indeed those of a middle-income country, at the black-market exchange rate this no longer holds. In this picture the majority of Venezuelans are poor.

Which picture is right? This depends on the capacity of the government to maintain its distributive policies including an overvalued exchange rate, which in turn depends on sustaining a steady supply of dollars. While Table 1 is likely a more accurate representation of income distribution in Venezuela between 2004 and 2012, I would argue reality is rapidly converging towards the second picture (Table 2), as the supply of dollars shrinks and becomes erratic.

Rodriguez

Some will correctly point out that the black-market exchange rate is not a proper measure of the market exchange rate one would see if it were allowed to float. In reality, it would be somewhere in between the official rate and the black market one (estimating this is not straightforward).

This deserves two comments: first, at this moment, as the government prevaricates in its economic policy, it is forcing the picture to look much more like Table 2 than need be, as goods are priced at the black-market rate for lack of access to dollars, or are simply non-existent. Second, Table 1 is but an illusion that is unraveling, with the trend nowadays clearly in the direction of the second picture. Whether we ever reach it or not is inconsequential for the argument that follows.

Yes, many Venezuelans, and most particularly the poor, managed to climb up the income ladder as a result of the government’s distribution of the oil bonanza. In particular, as has also been common in previous governments, through the use of an overvalued exchange rate. Yet, as dollars have become scarce for reasons that are beyond the scope of this article, the precariousness of these outcomes becomes manifest.

The income ladder has not only been withdrawn, but those that had climbed up are being pulled back down. I would posit that this, rather than middle class demands, explains the growing discontent, part of which (although far from its entirety) has expressed itself on the streets in recent weeks. Whether the “new” middle class identifies itself with traditional middle class demands of better governance and representation remains to be seen. The speed and means through which this change in incomes occurred – distribution of rents rather than productivity – arguably suggest the contrary.

That is not to say however, that the focus of the opposition’s discourse should lie on unsatisfied basic needs rather than demands for accountability, representation and political and economic freedoms. The challenge lies in explaining how the scarcity of the latter explains the abundance of the former.

Is this really so different from 1989?

Unfortunately the data on income distribution is not readily available, yet we can still look at mean income (in constant 2005 international $) measured at the official and black market exchange rates (see Figure 1). The widening gap between these two measures is evident since 2004. Yet we see exactly the same pattern in the period preceding 1989. As in 1989, what we are observing today is the confrontation of inflated expectations, formed over a period of bonanza and grand promises, with an increasingly grim reality.

In 1989 the consequences of this confrontation were traumatic. This time around, the gap between expectations and reality is I arguably much larger, and hence the potential for an explosive outcome much greater. A lot depends on how the government confronts its economic demons, although it might already be too late. If this narrative is correct, we have only seen the tip of the iceberg when it comes to discontent taking over the streets. Are the paramilitary groups known as colectivos enough to contain this?

Rodriguez 2

Mirages in the desert

To be clear, the proposed narrative is not inconsistent with Corrales’. It could very well be that the swelling of the middle class observed over the past oil boom led to the emergence of middle class demands for governance and representation. It should be possible to see this in surveys such as Latinobarómetro.  The narrative above however does claim that the main source of discontent brewing today is the result of the confrontation of inflated expectations with a dismal reality. This discontent is not so different from that which led to social unrest in 1989.  Venezuelans are once again at that point when the mirages created by the bonanza disappear, leaving them in the same desolation they found themselves in over twenty years ago.

The question that remains is whether the opposition is able to offer a way out of this vicious cycle. To do so, it must explain why we are where we are, and provide a credible vision of how we are going pull ourselves up by our bootstraps rather than hold on to vain hopes of a new bonanza. We all want the first picture to be true (Table 1). Indeed we want all blocks to be colored red or grey.  Yet the only way for this to be sustainable is via a continued increase in productivity. Our oil income can be an instrument in this endeavor but it can never substitute for our effort. Whether we’ve understood this remains to be seen, otherwise we will keep grasping at mirages in the desert.

04/26/2014

Pedro Luis Rodríguez

Assistant Professor – IESA/UCAB

@prodriguezsosa

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…. the government will likely try to
bring the more conciliatory segments of the opposition into some kind
of negotiation. This could weaken the protest movement by isolating the
more combative groups among the protesters from the movement’s
leadership negotiating with the government. If Sicad II effectively
distributes foreign currency, it could provide the opposition’s business
representatives with a reason for continuing negotiations. However, the
Maduro government will need to give the opposition’s political leaders
— including Capriles — more concessions to bring them into talks. … Maduro may need to make other moves, such as
releasing political prisoners, to bring a wider part of the opposition
coalition into negotiations. These are concessions he may not be able to
afford…

Venezuela’s New Economic Tool Could Advance Negotiations

 

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Jailed Venezuelan leader writes in the NY Times

Venezuela’s Failing State

Los Teques, Venezuela — As I compose these words from the Ramo Verde military prison outside Caracas, I am struck by how much Venezuelans have suffered.
For 15 years, the definition of “intolerable” in this country has declined by degrees until, to our dismay, we found ourselves with one of the highest murder rates in the Western Hemisphere, a 57 percent inflation rate and a scarcity of basic goods unprecedented outside of wartime.
Our crippled economy is matched by an equally oppressive political climate. Since student protests began on Feb. 4, more than 1,500 protesters have been detained, more than 30 have been killed, and more than 50 people have reported that they were tortured while in police custody. What started as a peaceful march against crime on a university campus has exposed the depth of this government’s criminalization of dissent.
I have been in prison for more than a month. On Feb. 12, I urged Venezuelans to exercise their legal rights to protest and free speech — but to do so peacefully and without violence. Three people were shot and killed that day. An analysis of video by the news organization Últimas Noticias determined that shots were fired from the direction of plainclothes military troops.
In the aftermath of that protest, President Nicolás Maduro personally ordered my arrest on charges of murder, arson and terrorism. Amnesty International said the charges seemed like a “politically motivated attempt to silence dissent.” To this day, no evidence of any kind has been presented.
Soon, more opposition mayors, elected by an overwhelming majority in December’s elections, will join me behind bars. Last week the government arrested the mayor of San Cristóbal, where the student protests began, as well as the mayor of San Diego, who has been accused of disobeying an order to remove protesters’ barricades. But we will not stay silent. Some believe that speaking out only antagonizes the ruling party — inviting Mr. Maduro to move more quickly to strip away rights — and provides a convenient distraction from the economic and social ruin that is taking place. In my view, this path is akin to a victim of abuse remaining silent for fear of inviting more punishment.
More important, millions of Venezuelans do not have the luxury of playing the “long game,” of waiting for change that never comes.
We must continue to speak, act and protest. We must never allow our nerves to become deadened to the steady abuse of rights that is taking place. And we must pursue an agenda for change.
The opposition leadership has outlined a series of actions that are necessary in order to move forward.
Victims of repression, abuse and torture, as well as family members of those who have died, deserve justice. Those who are responsible must resign. The pro-government paramilitary groups, or “colectivos,” that have tried to silence the protests through violence and intimidation must be disarmed.
All political prisoners and dissenters who were forced into exile by the government, as well as students who were jailed for protesting, must be allowed to return or be released. This should be followed by restoring impartiality to important institutions that form the backbone of civil society, including the electoral commission and the judicial system.
Continue reading the main story
In order to get our economy on the right footing, we need an investigation into fraud committed through our commission for currency exchange — at least $15 billion was funneled into phantom businesses and kickbacks last year, a move that has directly contributed to the inflationary spiral and severe shortages our country is experiencing.
Finally, we need real engagement from the international community, particularly in Latin America. The outspoken response from human rights organizations is in sharp contrast to the shameful silence from many of Venezuela’s neighbors in Latin America. The Organization of American States, which represents nations in the Western Hemisphere, has abstained from any real leadership on the current crisis of human rights and the looming specter of a failed state, even though it was formed precisely to address issues like these.
To be silent is to be complicit in the downward spiral of Venezuela’s political system, economy and society, not to mention in the continued misery of millions. Many current leaders in Latin America suffered similar abuses in their time and they should not be silent accomplices to the abuses of today.
For Venezuelans, a change in leadership can be accomplished entirely within a constitutional and legal framework. We must advocate for human rights; freedom of expression; the right to property, housing, health and education; equality within the judicial system, and, of course, the right of protest. These are not radical goals. They are the basic building blocks of society.
Leopoldo López is the former mayor of the Chacao district of Caracas and the leader of the Popular Will opposition party.

Venezuela’s Failing State – NYTimes.com


What will they think of next? Tufts University will introduce a new “gap year” program this fall that will pay students to take a year off to travel, work, or volunteer. The program, in which Tufts would pay for things like housing and plane tickets, is to remove financial obstacles for less-wealthy students to see more of the world. The amount of money could add up to $30,000 or more. Other universities have aid programs for gap years, including Princeton and the University of North Carolina. Around 40,000 U.S. students were in a gap-year program in 2013, up 20 percent since 2006.

Mar 14, 2014 12:29 pm EDT

College offers to pay students to take year off – News Local Massachusetts – Boston.com


The chutzpah!

Putin Defends Ukraine’s Jews, Slams Ukraine’s Jewish Oligarchs

Cites Ukraine’s appointment of oligarchs as governors as reason for unrest
Yesterday morning, Vladimir Putin, president of the Russian Federation, gave his first post-Crimea invasion press conference. What rapidly became apparent, as he slouched in a gilded hall studded with Russian flags, was that the combination of Putin’s surreal interpretation of events with his lavishly baroque epistemology has given form to some bizarrely contradictory dualities in his worldview. He railed against a politicized judiciary selectively prosecuting the enemies of the chief executive, overlooking that it’s exactly what the Russian Judiciary does routinely; he argued the change of government in Kiev was an armed coup, but the one in Crimea was entirely legitimate. The usage of force by Ukrainians is unjustified, but completely justified from the Russian side.

The Russian leader also insisted that Ukraine’s deposed president, Viktor Yanukovych, retains authority as the country’s elected head of state, but also described him as a corrupt failure whose political career was finished. Putin also admitted that he understood well popular demands for “cardinal changes in government” by Ukrainians—demands, he asserted, that simply stemmed from their “having become habituated to switching one thief and opportunist for another thief and opportunist.” He spat out the word “opportunist” in disgust.

Putin underscored that this radical discontent—what political scientists refer to as a democratic deficit—was the reason Ukrainians were no longer interested in participating in regional elections, and argued the appointment of oligarchs as governors of the Eastern Ukrainian provinces, not the Russian tanks that preceded them, is the reason for the unrest there. “Of course people do not accept this,” Putin thundered—a message which was directed less at the Ukrainians than at his own oligarchs, who shouldn’t entertain any ideas about becoming governors themselves.

And then Putin offered an intimate glimpse into the highly personal power politics playing out among the relatively tiny and tightly interconnected group of oligarchs—all men of a similar generation—who together control vast swaths of the post-Soviet economies. Putin called out one, `monsieur` Ihor Kolomoyskyi—either the second or third richest man in Ukraine and the newly appointed governor of Dnepropetrovsk, the country’s industrial hub—by name. “This man is a unique opportunist,” Putin remonstrated.

Kolomoyskyi is not unique, but he is a figure of collosal wealth and importance in Ukraine’s industrial behemoth of Dnepropetrovsk. Along with his friend and fellow oligarch Vadim Rabinovich, Kolomoyskyi also founded the successful Jewish News One TV station. He has also helped fund and recently inaugurated the Dnepropetrovsk Jewish cultural center, the biggest in the world. In a press conference that Kolomoyskyi held four days ago upon being appointed governor, he admitted that he had been put into place as part of a campaign of “expanding government outside of the purview of traditional politicians.” He also acknowledged that part of his job as the newly appointed governor of Dnepropetrovsk was to “tamp down separatism,” and spoke out against a century of Russian-driven partition of the land. Many Ukrainians assume that he had taken up the position mostly to protect his myriad business interests from being expropriated by the new regime.

Putin, however, had his own axe to grind against Kolomoyskyi on behalf of his friend Roman Abramovich, one of Russia’s wealthiest men. “He even conned our own Abramovich,” Putin asserted. Alternating legalese with tough guy slang, he explained Abramovich had transferred Kolomoyskui millions for a contract several years ago, and Kolomoyskyi other did not finish the job but pocketed the money. “I myself asked Abramovich why he did it later, and he told me he did not think it possible that someone would play him like that,” Putin explained. “This is a real life story. And that is the sort of bounder they wish to make governor!” The point to this brackish bit of business gossip, to put it as crudely as Putin did, was that the Ukrainian Jewish oligarch Kolomoyskyi out-Jewed Russia’s own top Jewish oligarch, Abramovich.

Putin then transitioned his rhetoric smoothly back to the “masked and unidentified armed groups of anti-Semites” running around Kiev with machine guns. Any resemblance to masked and unidentified armed men running around the Crimea with machine guns went unmentioned. What followed was curious display of Putin’s exceedingly odd usage of philo-Semitic tropes to appropriate the Soviet legacy of rescuing all Soviet people, but most especially the Jews, from the specter of fascism.

That the black and red flag of the Ukrainian Fascist partisans of UPA (The Ukrainian Provisional Army) flew over the Maidan is an undeniable fact, but the actual number of fascists in the Kiev streets remains a point of contention. The logic of the Russian chauvinist position in this crisis is that the Ukrainian opposition is composed entirely of Ukrainian fascists, neo-Nazis and Banderovtsi—partisans of the nationalist hero Stepan Bandera—frothing to commit pogroms against Jews as well as ravish Russia’s daughters and outlaw the usage of the Russian language in Odessa, Donetsk and, yes, the Crimea. In Eastern Ukraine, such sentiments amongst ethnic Russians are rooted in memories of World War Two. When expressed by politicians or government propaganda channels in Russia proper, they are manifestations of irredentism and political expediency.

Related: Before Crimea Was an Ethnic Russian Stronghold, It Was a Potential Jewish Homeland
After Yanukovych, Maidan’s Next Fight Will Be To Preserve a Ukraine Safe for Minorities


By sending troops into Crimea, Russian President Vladimir Putin has amplified Ukraine’s turmoil and set off the most dangerous crisis Europe has seen this century. Less noted, however, is that the move portends a significant change in Russia’s domestic politics. Putin has abandoned the strategy that has underwritten his political dominance for the last 14 years. And in doing so, he has bet the throne on an approach that is likely to fail.

The secret to Putin’s past political success is simple: Presiding over years of rapid economic recovery, he could claim credit for restoring stability after Russia’s chaotic transition from communism. During his first two presidential terms, from 2000 to 2008, the country’s growth rate averaged seven percent a year. In fact, that success mostly reflected factors beyond Putin’s control, including surging oil prices and a flood of liquidity into emerging markets. But it did also require a commitment to open borders, integration into international institutions such as the World Trade Organization and the Organization for Economic Cooperation and Development, cordial relations with Western business circles, and efforts to project an image of modernity and increasing sophistication. A 13 percent flat income tax and a conservative macroeconomic policy did not hurt.

As Russians’ incomes soared, so did Putin’s popularity. His consistently high approval ratings — since 2000, they have never fallen below 60 percent on polls conducted by the Levada Center, a Russian nongovernmental organization — have rallied Russia’s fractious elites to the president’s side and kept naysayers at bay. The global financial crisis in 2008–9 threw Putin’s strategy into doubt. By massively boosting spending, the government managed to protect Russians’ living standards. But in the last two years, the public has recognized that the growth rates of Putin’s first two terms are not returning. Since late 2011, quarterly growth has fallen steadily from 5.1 to 1.2 percent a year.

Recharging the economy would require a serious commitment to safeguarding property rights and attacking corruption. As stagnation deepened, rumors circulated in Moscow last year that Putin would reinstate his competent and respected former finance minister, Alexei Kudrin, and allow him to introduce political and economic reforms. But that did not happen.

Instead, with the invasion of Crimea, Putin appears to have settled on a Plan B for mobilizing support. Whereas the first approach demanded integration, the second embraces isolation. It involves appealing to emotional nationalism, berating the West, and rallying the public against supposed attempts at cultural imperialism. Plan B is not entirely new. In fact, Putin has been flirting with it since the mid-2000s. Since then, the two approaches have coexisted awkwardly. He has managed to slip back and forth between aggressive rhetoric — for instance, comparing NATO foreign policy to that of the Third Reich — and signing deals with Wall Street executives.

But with Russian troops now in Simferopol, Putin appears to have doubled down on nationalism and given up on rapid growth. The great champion of “stability” has taken to tearing up the map of Europe. Whatever the ultimate outcome of the recent intervention, it has already done serious damage to Russia’s economic prospects.

The military operation itself will not cost much, although perhaps more if Putin extends it to other regions of eastern Ukraine. Subsidizing the Crimean economy — and perhaps even that of Ukraine’s Russian-speaking rust belt — is not even the main concern. Nor is the ruble’s fall, which the Central Bank slowed on Monday with a frantic raise in interest rates and the sale of $12 billion of currency reserves. That will drive up prices of imports, which will surely anger consumers, but it will help exports and ease pressure on the budget.

The real problem is the potential medium-run fall in foreign investment and acceleration of capital flight. Wars tend to elevate perceived political risk — and that goes double when leaders’ decisions appear erratic. Western sanctions, if they materialize, will add to the discomfort. Few investors will want to tie up money in companies whose executives may be banned from travel to the West, whose accounts may be frozen, and whose board meetings may be upstaged by the home country invading another of its neighbors.

Putin may have discounted such economic consequences based on the short-lived and moderate international reaction to Russia’s 2008 war with Georgia. But that was quite different. Russian troops intervened only after Georgian artillery fired on Russian peacemakers and local South Ossetian civilians. In the Crimea, no one had shot at the locally stationed Russian troops with so much as a peashooter. The Ukrainian case looks more like unprovoked aggression. It also starts to look like a pattern — one that already has other countries with large Russian-speaking minorities, such as Estonia, Latvia, and Kazakhstan, worried.

If Putin has decisively embraced anti-Western nationalism as his mobilizing strategy, evidence suggests that it will not work.

For one thing, Russians, in general, do not like foreign adventures. A survey one month ago by the polling firm VCIOM found that 73 percent of respondents were opposed to Russia getting involved in Ukrainian politics. Not even supporters of the ultranationalist Liberal Democratic Party or the communists favored intervention. Of course, at the time of polling, Putin’s supporters might have thought that he favored staying out as well.

No polls have yet appeared on the Crimean operation. When they do, we should expect a temporary rally. Still, after previous comparable incidents, the immediate boost has been fleeting. In late 1999, Putin, then prime minister to President Boris Yeltsin, sent troops into Chechnya and saw his approval rating leap to 79 percent. By June 2000, it had tumbled to 61 percent. In March 2000, 73 percent of Russians favored continuing the military operation that Putin had started. By January 2001, that had fallen to 38 percent, and a majority already supported negotiating with the Chechen guerrillas. Russians rallied behind Putin in 2002, when Chechen terrorists took hostages in a Moscow theater. But just two months later, the six-point jump in his rating had evaporated. Similarly, as Russian troops fought in Georgia in September 2008, Putin’s approval surged by eight percentage points. Yet by February 2009, it had fallen back below the initial level.

Second, playing the anti-Western card may also work less well than Putin imagines. Strange as it may seem, Putin is actually much less popular among Russians who are hostile toward the West than among those with pro-Western views. After 13 years of hobnobbing with former Italian Prime Minister Silvio Berlusconi and German Chancellor Angela Merkel, it is hard for him to play the anti-establishment nationalist. In a November 2012 Levada Center poll, 72 percent of those who said they felt “very positive” about the United States approved of Putin. Among those who said they felt “very negative” about the United States, his approval rate was only 42 percent.

By reaching out to Russian patriots, Putin risks splitting his elite supporters. For his friends in business, the Ukraine operation creates enormous headaches — from potential sanctions and travel bans to market volatility and tighter Western credit. They will see the vulgar nationalism of some of Putin’s other friends costing them money and respect, and Putin’s unpredictable behavior threatening their investments. Their loyalty will become more conditional than it already was. And as economic conditions worsen, protests are likely to break out among ordinary Russians.

Putin’s Crimean adventure thus promises to accelerate the degeneration within his regime that started with the December 2011 demonstrations and the economic slowdown. Even if the Kremlin finds a quick and face-saving exit, it will have to juggle a multiplying series of challenges — dealing with the Ukrainian aftermath, minimizing international fallout, reassuring other neighbors, managing economic turbulence — just as differences of opinion within the inner circle make action more difficult.

Read the article online here: http://www.foreignaffairs.com/articles/141005/daniel-treisman/watching-putin-in-moscow?cid=soc-twitter-in-snapshots-watching_putin_in_moscow-030614


Ukraine Turns From Revolution to Recovery is republished with permission of Stratfor.”

Ukraine Turns From Revolution to Recovery

By George Friedman

The uprising in Kiev has apparently reached its conclusion. President Viktor Yanukovich and the opposition reached an agreement, negotiated by the Polish, German and French foreign ministers. The parliament is now effectively in charge, deciding who will be ministers and when elections will be held, whether to dismiss judges and so on. It isn’t clear whether the parliament can fire the sitting president without impeachment and trial, but all of this is now moot. What is interesting is that the Polish, French and German foreign ministers negotiated an outcome that, for practical purposes, ignored the Constitution of Ukraine. It sets an interesting precedent. But for Ukraine, the constitution didn’t have the patina of tradition that a true constitution requires, and few will miss Yanukovich.

The question now is whether all of this makes any real difference in Ukraine or the world. There is a new temporary leadership, although it is still factionalized and the leaders of the factions have not fully emerged. The effect of hostile gunfire will forge unity in Kiev for a while, but in due course, ideology, ambition and animosity will re-emerge. That will make governing Ukraine as difficult as in the past, particularly because the differences among the neo-Nazis, the liberals and groups in between — all of which manned the barricades — are profound. A government of national unity will be difficult to form.

Another issue is what will happen the next time crowds storm government buildings. The precedent has been set — or rather, it was set during the 2004 Orange Revolution — that governments and regimes can be changed by a legalistic sleight of hand. At some point a large crowd will gather and occupy buildings. If the government opens fire, it is run by monsters. I don’t mean that ironically; I mean it literally. But if the government allows itself to be paralyzed by demonstrators, then how can it carry out its constitutional responsibilities? I don’t mean that ironically either. The Ukrainian Constitution, new or old, is meaningless because Ukrainians will not endure the pain of following it — and because foreign powers will pressure them to deviate from constitutional democracy in order to create a new one.

There should be no mistake. The Yanukovich government was rotten to the core, and he will not be missed. But most governments of Ukraine will be rotten to the core, partly because there is no tradition of respect for the law and because of the way property was privatized. How could there be a tradition of law in a country that was reduced to a province of another state and that numbered among its rulers Josef Stalin? Privatization, following the fall of the Soviet Union, occurred suddenly with vague rules that gave the advantage to the fast and ruthless. These people now own Ukraine, and however much the crowd despises them, it can’t unseat them. The oligarchs, as rich people in the former Soviet Union are called, are free; they can eliminate their critics or bribe them into silence. The only thing that is more powerful than money is a gun. But guns cost money and lives.

The idea that what will follow the Ukrainian revolution will be the birth of a liberal democracy reminds me of the Arab Spring. In the West, there is a tradition of seeing a passionate crowd massed in a square as the voice of the people. Reporters interview demonstrators and hear that they want an end to a corrupt and evil regime and subliminally recall the storming of the Bastille, the founding myth of the revolutionary tradition. A large crowd and a building anger at government evil points to the millennium.

In the Arab Spring the hope was great and the results disappointing. There was genuine hope for change, and observers assumed that the change was for liberal democracy. Perhaps it will yet be. Sometimes it was a change to a very different type of regime. What is portrayed and seen in this situation are the corrupt leaders commanding brutal soldiers. If the regime and the soldiers are wicked, it follows by this storyboard logic of good and evil that then their victims must be virtuous. It is rarely that easy. It is not only that the crowd is usually divided into many factions and bound together only by anger at the regime and the passionate moment. It is also that unexpected consequences lead them far from what they intended.

How Long Will Unity Last?

The deepest symbolism of revolution, and the most problematic, is that the people in the square speak for the people as a whole. The assumption made by the three foreign ministers was that in the negotiation between the three leaders of the demonstrators and the president, the protests’ leaders were more faithful representatives of the people than the elected president. They may have been in this case, but it is not certain.

Parts of Ukraine are bitterly angry about the outcome in Kiev. A Russian flag was raised over the city hall of Sevastopol, located in Crimea in the south, over the weekend. Crimea has historically belonged to Russia. In 1954, Nikita Khrushchev took it away from Russia and gave it to Ukraine. The Russians in Crimea have never really liked being part of Ukraine and the demonstrators didn’t represent them. Nor did they represent all those who live in the eastern part of the country, where Russian is commonly spoken and where being close to Russia is both an economic and cultural desire.

Thus there are two questions. The first is whether there is enough unity in the Ukrainian parliament to do what they must now do: create a government. The excitement of the moment has hidden the factions, which will soon re-emerge along with new ones. Yanukovich was not without support, for good reasons or bad. His supporters are bitter at this outcome and they are biding their time. In addition, the oligarchs are weaving their webs, save that many of the lawmakers are already caught in their web, some happily and some not. The underlying constraints that created the Yanukovich government are still there and can create a new Yanukovich out of the most enlightened Ukrainian leader.

The second question is whether Ukraine can remain united. The distinctions between the region oriented toward the West and that oriented toward Russia have been there from the beginning. In the past, governments have tried to balance between these two camps. Our three foreign ministers and the leaders of the demonstration have signaled that the days of taking Crimea and the east into account are over. At the very least their interests weren’t represented at the talks. Those interests could be rebalanced in the parliament, or they could be dismissed. If the latter were to happen, will Ukraine split in two? And if it does, what will be the economic and social consequences? If parliament takes to accommodating the two sides and their respective oligarchs, then how does it avoid winding up with a more photogenic and sympathetic Yanukovich?

The Motives of Outsiders

What happened to Ukraine mattered deeply to the Germans, French, Poles and Americans, all of whom had a deep involvement and sympathy for the demonstrators and hostility toward Yanukovich. Certainly it matters to the Russians, for whom maintaining at least a neutral Ukraine is essential to the national interest. This entire crisis began when Yanukovich decided to reject closer ties to the European Union. It was that decision that triggered the demonstrations, which, after violent repression, evolved from desiring closer EU ties to desiring regime change and blood.

The Ukrainian government has $13 billion in debt, owed mostly to Western institutions. The Russian government has agreed to provide Ukraine with $15 billion in aid doled out in tranches to cover it, since Ukraine can’t. Russia is now withholding additional aid until it can be confident the emerging government in Kiev is one with which it can work. It has also given Ukraine discounted natural gas. Without this assistance Ukraine would be in an even worse situation.

In turning toward Europe, parliament has to address refinancing its debt and ensure that the Russians will continue to discount natural gas. The Europeans are in no position politically to underwrite the Ukrainian debt. Given the economic situation and austerity in many EU countries, there would be an uproar if Brussels diverted scarce resources to a non-member. And regardless of what might be believed, the idea that Ukraine will become a member of the European Union under current circumstances is dismal. The bloc has enough sick economies on its hands.

The Germans have suggested that the International Monetary Fund handle Ukraine’s economic problem. The IMF’s approach to such problems is best compared to surgery without anesthesia. The patient may survive and be better for it, but the agony will be intense. In return for any bailout, the IMF will demand a restructuring of Ukraine’s finances. Given Ukraine’s finances, that restructuring would be dramatic. And the consequences could well lead to yet another round of protests.

The Russians have agreed to this, likely chuckling. Either parliament will reject the IMF plan and ask Russia to assume the burden immediately, or it will turn to Russia after experiencing the pain. There is a reason the Russians have been so relaxed about events in Ukraine. They understand that between the debt, natural gas and tariffs on Ukrainian exports to Russia, Ukraine has extremely powerful constraints. Under the worst circumstances Ukraine would move into the Western camp an economic cripple. Under the best, Ukraine would recognize its fate and turn to Russia.

What the Europeans and Americans were doing in Ukraine is less clear. They had the triumphant moment and they have eliminated a corrupt leader. But they certainly are not ready to take on the burden of Ukraine’s economic problems. And with those economic problems, the ability to form a government that does not suffer from the ills of Yanukovich is slim. Good intentions notwithstanding, the Ukrainians will not like the IMF deal.

I will guess at two motives for European and American actions. One is to repay the Russians for their more aggressive stance in the world and to remind them of how vulnerable Russia is. The second is as a low-risk human rights intervention to satisfy internal political demand without risking much. The pure geopolitical explanation — that they did this in order to gain a platform from which to threaten Russia and increase its caution — is hard to believe. None of these powers were in a position to protect Ukraine from Russian economic or military retaliation. None of them have any appetite for threatening Russia’s fundamental interests.

As stated above, the question now is two fold. Will the Ukrainian parliament, once the adrenaline of revolution stops flowing, be able to govern, or will it fall into the factional gridlock that a presidential system was supposed to solve? Further, will the east and Crimea decide they don’t want to cast their lot with the new regime and proceed to secede, either becoming independent or joining Russia? In large part the second question will be determined by the first. If the parliament is gridlocked, or it adopts measures hostile to the east and Crimea, secession is possible. Of course, if it decides to accommodate these regions, it is not clear how the government will differ from Yanukovich’s.

Revolutions are much easier to make than to recover from. This was not such a vast uprising that it takes much recovery. But to the extent that Ukraine had a constitutional democracy, that is now broken by people who said their intention was to create one. The issue is whether good intentions align with reality. It is never a bad idea to be pessimistic about Ukraine. Perhaps this time will be different.

Ukraine Turns From Revolution to Recovery

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