The Legatum Institute's Transitions Forum
hosted Andrei Kirilenko
, Professor of the Practice of Finance, MIT Sloan School of Management, for a conversation on how to tackle Ukraine
’s economic crisis.
In his talk, Kirilenko explained how the country’s economic transition has been hampered and even derailed by political and societal issues, not to mention the war in the East.
The International Monetary Fund (IMF), Ukraine’s biggest creditor, established its new macroeconomic policy. Kirilenko described the structural adjustment “like physical therapy rather than attempting to put a band aid on an open wound”; but warned that the country is bankrupt and poses a greater risk to the IMF than Greece as it attempts to pay back loans amounting to around 20 percent of its GDP.
Kirilenko criticised supposed “reforms” that in fact are “rejuvenating the old model of empowering the same group of people”. Oligarchs continue to take resources from the many, distributing them to the few, and Ukraine is “heading south despite being a fairly simple macroeconomic case”. He put this continuation down to the lack of any financial regulatory authority, and the “negative selection process” that blights Ukrainian politics—those at the top of government are neither the most experienced nor the most capable.
Whilst offering possible economic solutions, Kirilenko stressed that in order for Ukraine to become prosperous in the long-term it also needs serious political reform. “I’d like the government to stop intervening in the market and become less paternalistic,” he explained. The unbundling of natural gas from the state and plans to abolish the Minister of the Economy are some positive steps, as are the appointments of some ministers from other countries. Faith needs to be restored in both politics and politicians. The post-revolution government was an “interim”, still part of the old system he argued; “who the people of the Maidan truly want to represent them will only become clear after multiple cycles of elections”.
About the Speaker
Andrei Kirilenko is the Professor of the Practice of Finance at the MIT Sloan School of Management. Prior to joining MIT, Kirilenko spent four years at the Commodity Futures Trading Commission (CFTC) where he served as chief economist between December 2010 and December 2012. He chaired two subcommittees of the CFTC Technology Advisory Committee: the Subcommittee on Data Standardisation and the Subcommittee on the Automated and High Frequency Trading. He also represented the CFTC at the Systemic Risk Committee and the Systemic Data Committee of the Financial Stability Oversight Council. In 2010, Kirilenko was the recipient of the CFTC Chairman's Award for Excellence (highest honour). Prior to joining the CFTC, Kirilenko spent twelve years at the International Monetary Fund working on global capital markets issues.
The Transitions Forum is a series of projects dedicated to the challenges and possibilities of radical political and economic change.