Libertarianism in Ukraine – a project for development and growth

Author: Yaroslav Romanchuk, economist and politician from Belarus, president of Scientific Research Mises Center

Libertarianism is a worldview that is formally unknown to the majority, and Ukraine is no exception. People rarely study right-wing political philosophy in depth. Even intellectuals give contradictory, often completely opposite definitions of the term “freedom.” Namely, freedom is the central element of libertarianism.

Libertarianism is not the laws of Newton, Ohm or Archimedes, but complex, conceptual, often contradictory or even completely opposite theses, hypotheses and statements. This is also the reason why libertarianism is an easy prey for the enemies and opponents of the theory and practice of freedom - especially in countries in transition and developing countries. It is enough for the media to show American, British or German libertarians and their agenda (drugs, same-sex marriage, euthanasia, weapons, abolition of all taxes, voluntary slavery, trade in human organs/children, abolition of the state pension system, state-funded schools, etc.) to cause an opening in most people, including a large part of supporters of freedom.

One level of discussion about the modern world from the position of libertarianism can be observed in university auditoriums and student campuses, especially in the USA. The priorities of many American libertarians raise doubts about their adequacy and usefulness for the promotion of freedom. Unfortunately, their agenda fails to achieve its goals – half of Americans would support a socialist president, almost 70% of youth vote for outspoken populist-socialists like Bernie Sanders, continue to romanticize the murderer Che Guevara and do not see an evil empire in the face of the Soviet Union. The obvious turn to the left of the USA and the EU is partly to blame for some gross mistakes of Western libertarians in the choice of methods, means and tools for the promotion of this worldview, as well as for the practical implementation of freedom in general. Of course, we are not talking here about the scientists and experts who are concentrated, for example, in the Cato Institute, Competitive Enterprise Institute, Atlas Network or Reason Foundation.

Ukraine, as well as the entire post-Soviet society, must necessarily learn a lesson not only from the failures, but also from the achievements of Western libertarians. And there are not a few of them either. To begin with, in Ukraine it is necessary to create an economic policy adequate for a transitional country. It must be based on the theory and practice of freedom, the worldview of libertarianism and its fundamental principles. Their practice and implementation must be consistent with the Ukrainian context, with the state of various institutions, society, business and the state. Libertarianism cannot be implemented in Ukraine with a tabula rasa, nor does there exist a leader with the status of a “benevolent monarch/dictator”. On the other hand, we have the following factors:

• Huge distrust of state institutions against the backdrop of short-term (maximum 18-24 months) trust in President Volodymyr Zelensky.
• Powerful oligarchic clans, each of which has seized its share of the decision-making process, the media, the budget pie, and non-market control of assets.
• "Gray economy" and "black market" as a popular protest against all-encompassing state interventionism, commensurate with the country's GDP.
• Critically low level of the state governance system, which is plagued by conflicts of interest, nepotism and corrupt practices (with a large unreformed state sector – approximately 3.5 thousand state-owned enterprises, which represent more than half of the market in 15 out of a total of 28 sectors).
• Acute deficit of an independent, professional and non-corrupt judiciary and law enforcement agencies.
• Widespread dependence on the state among the population, low levels of financial literacy, and infection of the intellectual and academic elites with the theory and practice of general state interventionism.
• An unbalanced system of public finances: high public debt, high tax burden and expensive maintenance of the tax administration.
• Deprofessionalization of companies in the infrastructure services sector – monopoly/oligopoly (roads, electricity, water, heating, garbage).
• Increased emigration of professionals.
• Ukraine lags significantly behind EU countries in terms of living standards, labor productivity, energy efficiency, and state and corporate competitiveness.

These ten factors should determine the choices and priorities of the president and the new government in Ukraine if they want to ensure rapid (6-9% GDP per year), long-term (at least 20 years), inclusive (for the benefit of all, not just the oligarchs) growth. This choice is libertarianism – as a systematic, comprehensive political-philosophical worldview, and also a truly adequate economy, that is, the Austrian school of economics, its theory and political economy.

There is no point in confusing and scaring people with various “-isms”, complex terms and constructions. Given the powers of President Zelensky and the chances of the Servant of the People party, together with potential partners, to form a majority in the Verkhovna Rada in the spirit of freedom – it is now important for libertarians to propose:

A solution to the most pressing socio-economic problems of the population, the creation of such institutions that will minimize the risk of Ukraine returning to its state from 1991 to 2019, which will most contribute to the emancipation of people and producers of products and services, and will also put a tight straitjacket on the state authorities. This is not shock therapy at all. This is a scientific, systematic, powerful course of rehabilitation of the economy. Rehabilitation through freedom, acceleration of competition and legal enthusiasm. Here is a basic package of proposals/solutions for the implementation of the project "Libertarian Ukraine".

The basic package of institutionalization of freedom must solve problems in ten areas (here we do not include law enforcement agencies and the court): 1) money, 2) budget, 3) taxes, 4) property rights, 5) work, 6) health, 7) education, 8) utilities

1. Money - multi-currency, 0% state participation in bank capital, in financial market structures, implementation of Basel III standards, legalization of private money issues based on gold standard collateralization, legalization of commodity exchange facilitators in the form of electronic receipts (various types of coins), removal of barriers that prevent the movement of capital abroad, inflation target - maximum 2% per year.
2. Budget and state finances– full transparency of all revenues and expenditures of state bodies and all those who receive state subsidies, ban on budget deficits, introduction of a limit on state expenditures of no more than 30% of GDP, from 2024 – a maximum of 25% of GDP. Elimination of the practice of subsidizing and supporting business activities from the state budget.
3. Taxes– 1) flat tax on revenues from retail trade in products and services (a single rate within 15-20% of the retail price of the product/service, 2) flat income tax for individuals – 10% of all income (people with a monthly income of less than $150 are exempt from the tax; 3) excise duties (alcohol, tobacco products, energy products – European rates) are paid by the manufacturer. By 2024, transition to a single customs tariff for the import of goods, within 3-5% of the declared value. After 2024 – reduction of customs duties to 2% or their complete abolition.
4. Property rights– expanding the private sector to 90% of the country's assets and resources, including land, limiting state ownership to the areas necessary to protect the sovereignty, territorial integrity of the country, and the vital functions of the state.
5. Work– legalization of all types of employment that do not pose a direct and obvious threat to the lives of citizens, elimination of barriers to a flexible labor market, elimination of all taxes, prohibition of inspections, and repeal of all regulations for entrepreneurs with a monthly income of up to $3,000.
6. State services– elimination of conflicts of interest in government bodies, radical cuts in state functions – from 7.5 thousand to 100 in free Ukraine, adoption of clear criteria for assessing the quality of budget expenditures.
7. Health– transition to a system of individual medical savings funds, creation of open competition in medical services, compilation of a closed, comprehensive list of all services/medicines that are provided to citizens at the expense of taxpayers (insulin, ambulance, etc.), liquidation of the Ministry of Health, minimum salary for doctors – $400.
8. Education– autonomous schools and universities, free competition among educational standards, as well as forms of primary, secondary and higher education, liquidation of the Ministry of Education, minimum salary for teachers – $400.
9. Utilities– introducing international corporate governance standards in all infrastructure sectors, transparency in their cost management and in the purchases of materials and energy resources, creating competition among private companies, while simultaneously preserving state ownership of roads, the power grid, and water pipes.
10. Foreign trade– competition in standards and certifications of goods, elimination of quotas and licenses that limit choice. Reduction of prices and ease of access to the infrastructure for certification according to international standards. Elimination of the practice of state stimulation of exports and import substitution.

Translation: Marina Zaharieva

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