Transformation of Ukraine’s Economic System at The Turn of the 1980s And 1990s: From Centralised Planning To Free Market Relations

Abstract

The article reviews the transition of the Ukrainian economy from a planned to a market at the turn of the 1980s and 1990s. The main reason for the start of reforms was the large-scale crisis in the USSR economy. It could not be overcome using the command-and-control methods familiar to the Soviet authorities. As a result, in 1985, reforms known as ‘perestroika’ began in the USSR and, subsequently, in the Ukrainian SSR. It is determined that the reason for their failure was that the communist nomenclature was not ready for genuine market transformations. It was necessary to dismantle, rather than save, the planned Soviet economy using market instruments. Instead, ‘cosmetic’ reforms further deepened the crisis, which eventually spread to the social and political spheres.

The Ukrainian governments of the first years after independence were also unprepared for real reforms, as mainly former communist leaders formed them. The authorities declared reforms, but in practice, they slowed them down and used them for their own enrichment. As a result, by the mid-1990s, the crisis in Ukraine’s economy was even greater. Only after Leonid Kuchma became president, the government started to roll out real market reforms. They managed to improve the state of the economy and introduce a stable national currency, the hryvnia. However, the continued growth of the authorities and business prevented the reforms from being fully successful. The transformations in the Ukrainian economy caused it was primarily enterprising people close to the authorities and, in some cases, the criminal world who benefited.