By: Yevgeniy Pasishnichenko –
The engineer of Reaganomics comes
to Ukraine: what should we expect? The regime of Pinochet in Chile gives us some clues …
not only in “independent” Ukraine, but around the world laugh at the outright
impotence of the current regime, which is not capable of managing the country.
A few days ago a new figure was added to the large group of “foreign
Ukrainians”, who in fact, are running the country. Now an American
economist Arthur Laffer has been appointed as an advisor to the ex-American
Minister of Finance of Ukraine Natalie Ann Yaresko. What can we expect from him?
of the theory of “supply-side economics” will oversee Ukraine’s
taxation. In his days “the newly appointed Ukrainian” was economic
advisor to the US President Ronald Reagan and the British Prime Minister
Margaret Thatcher. This news requires time for serious reflection. But
something can be said now.
are already making jokes about the foreigners in Ukraine: 1. Saakashvili is
frolicking in Odessa; 2. Abromavic has saddled the trade; 3. Kvitashvili
promises European medical treatment for everyone; 4. Natalie Ann Yaresko counts
Ukrainian money … And now Laffer is beginning to collect Ukraine’s taxes.
Arthur Betz Laffer is
an interesting person. He was born on August 14, 1940 in Youngstown, Ohio. Laffer earned a B.A. in Economics from Yale University (1962) and an M.B.A. (1965) and a Ph.D. in Economics (1971) from
University. In 1971 he became a Doctor of Philosophy with a degree in “economics”.
Until mid-1980s he worked as a tenured professor of the Graduate School of
Business at the University of Chicago and the Marshall School of Business. In 2008, he was named a Distinguished
University Professor of Economics by Mercer University in Georgia. Laffer became well known
during the reign of Reagan, when he became a member of the presidential council
on economic policy.
His name is
associated with, a very sad for ordinary Americans, era of Reaganomics – an economic policy of the
American government based on constant “credit stimulation”, reduction
of social expenditures (they increased significantly only in the defense industry)
and taxes, reduction of the state influence on the economy and deregulation of
All this led to
serious problems. In seven years the National debt of the United States
tripled, soaring to 2.8 trillion dollars. Social stratification increased
dramatically during the Reagan era. The number of Americans living below the
poverty line increased to nearly 32 million. Homeless became a real scourge in the
major cities …
The theory of
Milton Friedman of the University of Chicago, revered by the current advisor to
the Minister of Finance of Ukraine, brought a lot of troubles to many
countries. An example of what can result from realization of this theory into
practice is the situation in Chile, when in 1973 President Salvador Allende was
overthrown with the help of the CIA and dictator General Pinochet came to power.
In order to “reform” the country’s economy Pinochet summoned the so
called “Chicago boys” from the United States – 30 Chileans who studied
economics at the University of Chicago, in which Laffer was playing an
important role and who developed a “special program”. What came of
At first, they managed
to lowered inflation and at the same time caused a rise in unemployment from
9.1 to 18.7 percent. In just one year (from 1974 to 1975) the GDP of Chile fell
by 12.9 per cent. It was the most severe since the 30s depression in the
country. In 1976 there was a slight increase in economic indicators, which was
called the “Chilean economic miracle”. But the final result turned
out to be a grim one. The economy of once prosperous country still cannot
overcome the effects of this “miracle.”
From 1973 to 1987
the main indicator of living standards (GDP per capita) in Chile fell by 6.4
percent. People became totally impoverished. An average worker in 1989 was
living worse than in 1970. Half of the population was below the poverty line
and one third of Chileans were in a desperate situation. The UN began to speak
openly about the humanitarian catastrophe.
Around Santiago and other large
cities mega slums sprung up. They were the camps of the hungry. Life in them
was maintained only due to free soup kitchens organized by international
volunteers. By 1988, the number of Chileans who did not have permanent housing had
grown from 27 to 40 percent. There was an enormous income inequality between the
rich and the poor. Representatives of seventy-nine richest households were receiving
nearly 47 percent of the national income! ..
In Ukraine the
situation for 75-year-old American is a convenient one. In 24 years of
independence the country has developed an oligarchic economy, in which several
dozen families own 86 percent of the national wealth. There are horizontal ties,
logistics, methods of budget’s milking, embezzlement, fusion of big business
and power. Everything seems to be good, but the taxation is a mess. At the
request of the Ukrainian government Laffer has come to the country to
“restore order” and “to harmonize the situation” in this
oligarchic authorities (that is the proper name to call them, because even the
president is an oligarch) have no motivation to improve the lives of ordinary
citizens. They are interested only in their own well-being. Hence the merger of
the state and big business. This is the true cause of the corrupt nature of Ukraine’s
economy. The tax system of Ukraine is working to preserve the budgetary trough
in the interests of domestic billionaires and transnational profiteers.
sometimes the system experiences malfunctions with subsequent unrest, strikes,
demonstrations, Maidan. It seems so that Laffer was invited to Kiev to repair
the already functioning mechanism for robbing the people, including by
international financial corporations. It is impossible to expect something
different from the engineer of Reaganomics.