The Ukraine Uprising: Analysis

February 1, 2014

I have been to Ukraine numerous times. Lectured there. Received honorary doctorates from their Universities. Published books and articles in Ukrainian. Worked with Ukrainian business executives and their managers. But in all my experience working worldwide, I have never heard of or come across such blatant, open, shameless, corruption as I have encountered in Ukraine.Don’t misunderstand. I know there is a lot of corruption everywhere. Even in the United States. Even in my home city. If you want a license to build a house in Santa Barbara you need a permit, which might take a year or more before it is approved by the bureaucracy. So you hire a “middleman” who used to work at the department of urban planning and who knows the ropes. He is called an expeditor, and for a fee will make sure that your request for a license is granted in less than a year.To me that is corruption… though everyone considers it a normal way of doing business.There is corruption of course in every nation-state. You will find it in Israel, in India, in Brazil. Name any country and you will find traces of corruption. But Ukraine is a different story. It represents a paradigm shift in the magnitude and nature of corruption. A sizable jump to a different level of corruption that places it in a league all of its own.I was told but did not validate that in Ukraine you could get a medical degree for a fee. Just pay a bribe. Same with a degree to parade as a lawyer. Or any other license.Just imagine going to a doctor to be treated and you have no idea if this “professional” is really trained or just bought the degree… To me this is a nightmare. A total breakdown of trust.But it does not end there. Government officials will not let you operate in the marketplace unless you pay a fee for protection; in this case protection from them. In its own way this is a system patterned after the mafia. If you do not pay a significant fee monthly or annually the officials will take over your business. Nationalize it or remove the license to operate. And in many cases they take ownership of the business as well.During my last trip I was told (after one of my lectures) by a leading business leader who was in the audience how a Western bank lost its investments in Ukraine.The bank invested a significant amount of money in Ukraine so that it could finance loans. The loans were given to businesses that were either owned directly by the state, or to people very close to leaders within the state, or to those who worked directly for the government itself.That kind of bias is questionable but in Ukraine they took it one step further. The loans were simply never repaid.It is useless to sue in court. The courts are corrupt and in collusion with the government.Unable to collect, the mother bank put its branches in Ukraine for sale at ten cents on the dollar. Lost billions of dollars. And who bought the bank? A member of the President’s family in Ukraine.It can have another variation of the scheme. The government gives loans to the banks to finance the economy. The bank loan it to businesses owned by those government officials. The businesses refuse to pay back the loans. The bank bankrupts and the government loses its loan but all the money ends in the hands of the government officials via their companies.Nice scheme, eh? Open. Known by everyone.The openness with which the ruling politicians take advantage to enrich themselves at the expense of the nation is mind boggling. Anyone who is able to do so takes any assets they can out of the country, and no one in his sane mind is willing today to invest in the country. Ukraine is not going bankrupt. It is already bankrupt as a system.What to do?A leading intellectual of Ukraine asked me that question; his name of course has to remain anonymous.I offered a one sentence response: “The fish stinks from the head, but it is cleaned from the tail.”In other words, the corruption comes from the leaders of the country. They set the tone. They lead the parade. They are the cause of the stinking situation. Common logic suggests they need to be changed in order for the situation to change.Good. But who will change the leadership? They will not change by themselves.Alas, you cannot change corrupt leaders by democratic means, by voting them out of power. Those in power will rig the votes.External sanctions do not work either. The corrupt leadership makes itself even richer during times of sanctions. They control the black market for the essential goods the nation needs. It is rumored that Milosevic made billions of dollars importing gasoline across the border in spite of the sanctions against Serbia. Being the only supplier he could charge a fortune.There is only one solution: clean the fish from the tail. The people must rise in protest. And not desist, regardless of the cost in lives, until they have prevailed. They must say, enough is enough and take to the streets. And remove by force the corrupt leaders. To the barricades. To the Bastille.In Davos where I recently served on a discussion panel I was told that the President of Ukraine threatened to shoot at the demonstrators if they do not disperse.I said I hope that he does so. The audience gasped.But shooting demonstrators, one’s own nationals, will infuriate the people and make them even more committed to overthrowing the President and his party leaders. Just the way the Romanians got rid of Ceausescu.It needs to get real bad before it gets better.Changing the leadership is only one step towards the rehabilitation of the system. It is not enough. You may cut off the head, but the rest of the body is still infected.Ukraine needs new leadership that has not been infected by corruption; God forbid the new regime is cut from the same cloth as the old one. The country will slide even further into despair… and it is not only money that will leave the country. Anyone who can walk will flee. (Maybe it was a blessing Ukraine did not join the EU. If people had the right to move freely anywhere in common market Europe, Ukraine would soon be empty of its inhabitants that have any brain to sell.)It is important to recognize that in an uprising the goal is not only to rid the nation of its corrupt leaders but to make sure as well that their replacement are not corrupt. And the new leaders must understand that cleaning house needs to be their first priority; an end to corruption their first assigned task.That is never easy.I believe that bureaucracy is often the cause of corruption. “A hole in the fence calls for a thief” is a Hebrew expression and all countries in transition experience major disruptions that cause “holes” to emerge in the process of governance. That is called bureaucracy. And people are human and some do not have the strength to resist temptation and “crawl through the hole“ to steal. That is corruption.The new leadership in Ukraine---if one comes into being--- needs to re-model the system. To close the “holes” to create accountability and transparency. To remodel the present day bureaucracy rather than only punish those who continue to act corruptly. Not unlike the changes the leadership in the Republic of Georgia did a decade ago. And the changes the leaders of Macedonia are implementing today.It can be done. It needs to be done. It must be done.And I pray it will be done.Dr. Ichak Kalderon Adizes

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Dr. Ichak Adizes