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Joining Russia's Fast-Growing Economy Could be Good Move for Crimea

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East Europe GNP Growth 2.5 Times Stronger OUTSIDE the EU: is Ukraine's Euro-Dream Just a Dream?

As Crimeans vote in Sunday's referendum, one thing on their mind will be the economic prospects of the choice of Russia or Ukraine. Ukraine's biggest problem is lack of economic growth - the slowest of any post-Soviet republic:


Post-Soviet Growth Rates
(image by OpenCanada.org)

Meanwhile, Ukraine's post-Soviet neighbors outside the EU have put in some pretty impressive performances. So is EU membership really going to help Ukraine? 

The EU experience has disappointed many people in Eastern Europe. But what hard data are there to compare the growth performance of Eastern European countries inside and outside the EU? For a quick comparison of EU vs. non-EU countries, I compiled the latest available data from Wikipedia's   list of GNP growth by country.

This is what I found: Average 2012 GNP growth for eastern European countries that are outside the EU was   3.1%; while for eastern European countries inside the EU it was only 1.2%. That's 2.5 times as strong outside the EU as in it.
For the EU as a whole, GNP growth was negative at -0.4 to -0.7%.

This sort of begs the question, why would anyone want to join the EU? How is the EU going to help Ukraine when they can't even help themselves? Europe is looking for more customers, not more cut-price competitors. 

The best deal for Ukraine would be for its citizens to have visa-free travel to Europe, but without giving the EU, IMF and Wall Street control over their assets and economy.

Table - 2012 GNP growth, Eastern Europe, in % 


GNP Growth Outside and Inside the EU
(image by John-Paul Leonard)

 
For the European Union as a whole, GNP shrank in 2012, by -0.4 to -0.7%  (with +0.1% to -0.5% being reported for 2013).   Ukraine is unlikely to do better in the EU than its large Eastern European neighbors, Romania and Bulgaria, with 0.7 or 0.8% growth.
(Crimea is even poorer, with only about 2/3 of the Ukrainian income per capita of $7,300, compared to $22,750 for Russia and $32,950 for the EU.) 
Why has Ukraine done so badly? Presumably corruption and a political failure, with eastern and western factions of so-called "oligarchs" (actually just outrageously corrupt swindlers) rivaling each other over which party can steal more from the state. The first moves of the junta, appointing these insatiable wolves to guard the regional henhouses, isn't a promising solution. 
Frankly, Ukraine's best bet could be to go back to Mother Russia. According to the above chart by a Canadian think tank, Russia's economy grew 246% over the last 22 years, while Ukraine eked out only 44% - that's a mind-boggling 5.6 times slower. For bankrupt Ukraine, going back to Mom looks like a no-brainer.
 
Even the "Go West Young Man" promise of individual emigration to the more prosperous economies doesn't always work out. For every success story, there is at least one talented, ambitious expatriate stuck in a menial job, who could have stayed home and had a real career. Ukraine needs to build up Ukraine... 

No doubt, economists could write reams refining these rather rough-and-ready statistics. But it wouldn't would change much. The simple fact is that Russia cares far more about Ukraine than Europe does, and is in a lot better position to help, too.

Here's one more interesting figure, though, from the World Bank:

Income per capita (GNI) growth, 2002-2012
European Union 187%
Russian Federation 605%

Ultimately the Ukraine crisis is about the failure of oligarchical systems to deliver the goods. Not too long ago, the US and EU excelled at providing a better life for their middle classes. But decades of rising inequality, corporate greed, rigged democracy, and squeezing the workers and the poor, have all taken their toll. They can no longer deliver the dream they are selling. That makes it harder to keep rising Russia down.   Over the last decade, personal income has grown more than three times as fast in Russia as in the EU. 

The banking interests try to keep their casino going by plundering one nation after another -- especially any that don't play the game, and strive to become strong and independent through populism and nationalism. They are attacking now on three continents at once, targeting Syria, Ukraine/Russia, and Venezuela for their meat grinder.

If the vultures are defeated on these fronts, it will be a victory for economies and governments of the people, by the people and for the people everywhere.

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Publisher doing business as ProgressivePress.com. Linguist. MBA 1980, UC Berkeley. BA Political Science, 1972, UCLA.

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Seems like we could be at a turning point with the... by John-Paul Leonard on Monday, Mar 17, 2014 at 12:03:36 PM
Ukraine's GNP set to drop further under new IMF a... by John-Paul Leonard on Tuesday, Mar 18, 2014 at 11:19:44 AM