We see every type of activity that complicates or precludes legitimate production. It is hard to find legitimate productive activity that has not been made less rewarding by the comprehensive efforts of other Ukrainians.
Every morning, millions of Ukrainians go to work. But those Ukrainians that go to work in Canada, in the United States or in Germany earn ten times more than those who work in Ukraine and, presumably make ten times more product. It could have been a miracle, but it is not: If you transport a Ukrainian cat to Canada, it does not grow to the size of a tiger.
What makes people work better? One reason is environment. If your marching song is funny, if you sing it with friends, if your shoes don't kill your feet, or if you are looking forward to a beer, you walk faster. The Western environment helps people to concentrate on their work, making work more pleasant and people work better as a result. When people work better, they legitimately expect better wages. The converse is also true: when people expect better pay, they work better. Yet this alone cannot explain a tenfold difference in productivity and pay. The only thing that can explain it is the destruction of labor.
If for every five Ukrainians who create, build and produce there are four who impede, control, destroy, waste or steal, the combined productivity of these nine people will be five minus four equals one. That's nine times less than it would have been had all nine of them been producers.
What is productive labor? It is when you make something that people need, using time and materials with a combined cost that is less that the product you've made. A chair is valuable, but not when it is made from a Leonardo Da Vinci painting. Nor would a chair be valuable if making it prevented other people from making their chairs.
In Ukraine, we see every type of activity that complicates or precludes legitimate production. In fact, it is hard to find legitimate productive activity that has not been made less rewarding by the incessant and comprehensive efforts of other Ukrainians, first among them being the government. In fact, the Ukrainian state is resolutely orientated to inhibit legitimate success. The state approves of financial gain and actively seeks it, but only if it is illegitimate and was not the direct result of honest productive work. In a Stalinist labor camp, the vory v zakone, or thieves-in-law, were the only ones who never went hungry, and they were also the only ones who did not work. Unfortunately, the government has not succeeded in breaking out of that mentality. Ukrainians who earn a living through honest business activities (and fortunately there are more and more of those), know that they are suspect and have a lot of explaining to do. Meanwhile, bureaucrats whose lifestyle far outstrips their official income need explain nothing.
States should provide their citizens with well-equipped schools, functioning hospitals, an adequate army, good roads, and laws that respect the right of every individual to attain success through honest productive activity, as well as public servants who are respectful and protective of the people they are called upon to serve. When these public goods and services are in evidence, people are ready to pay taxes, since they know that these services come at a price.
A state can and should demand taxes. But taxes should not be so high as to make productive activities unprofitable. In fact, the main concern of the state should be the long-term profitability and competitiveness of businesses, because these businesses constitute the sole source of income both for the citizens and for the state itself. A key state role is to nurture and to protect businesses, and in fact, the best policy is to give fledging businesses cheap loans, managerial advice, and tax holidays to help ensure their success. This policy is not charity - to the contrary, it is calculated to extract the maximum tax over the long run. The stronger the enterprise, the more taxes it will pay over the years, even if tax rates are low.
But the Ukrainian state does not operate this way. It demands that businesses give as much as it can take, and it wants it now, even if that will force the business to close. In so doing, Ukraine's tax authorities are carefully preserving a historical tradition that goes back to the Mongol invaders that looted Kyiv a thousand years ago.
Today, Kyiv is peppered with billboards that suggest that the state has the right to extract taxes. But the message would have been more effective if the roads were not quite so potholed. The citizens are not the state's indentured servants: They pay the state to provide public goods, including good roads, and have the right to demand an honest accounting of how their money is spent. And honest accounting is what they get, as the public servants' brand new Mercedes easily traverse the potholes that endanger the lives of taxpayers in their rickety Zhigulis.
Here is a typical story. Two Ukrainians had a small workshop, where they bought baby carriages from a Ukrainian plant, modernized them and sold them in Poland.
Why modernize a brand new product? Could not that plant do it itself? No, it could not, because that plant was an official Ukrainian enterprise, that is to say, a sitting duck for tax authorities, who had long since bled it dry. The average wage of the workers at the plant was $100, and the average lunch was a cup of instant noodles. A plant employing hungry, dispirited workers could not assemble baby carriages correctly. The workers had stolen everything at the plant that was not securely nailed down, but now there was nothing left to steal.
Some states offer their outmoded plants special loans to modernize facilities and retrain workers, tax rebates and write-offs, but Ukraine does not do so, and at any rate, this particular plant was already too far gone for that.
At the workshop, the entrepreneurs worked successfully for a few months, making and selling a good product, paying taxes and feeding their families. Then the tax authorities came. Ukrainian tax laws are intentionally unclear, ensuring that anyone can be fined. Since our guys neglected to pay a gratuity deemed reasonable by the inspectors, a huge fine was assessed. The fine occurred at the precise moment when the guys had money in the bank that they had borrowed to purchase carriages. The bank account was seized to pay the fine, leaving the guys penniless and in debt.
The next day, their creditor called in the debt, demanding that it be paid immediately and with usurious interest.
In the West, banks make business loans and don't cue the tax police to the best time for a shakedown, in Ukraine, it is the reverse. Our entrepreneurs were compelled to sell their apartments and cars and to go to work as taxi drivers.
How much did the state gain? Who benefits from ruining a small business and the only purchaser of these pitiful baby carriages, to boot? The tax laws have an effect worse than that of a fire, because after a fire, people rebuild. Ukraine’s business environment is such that it discourages people from even trying.
With legitimate productive activity too dangerous to undertake, Ukrainians attempt to earn a living in a way that does not involve production - stealing from the weak. Here is how one bulldozer owner makes a living: In the pouring rain, he goes to an unpaved road. There, he quickly digs a ditch across the road. Soon the ditch is filled with water, and he is in business. He waits nearby, smoking a cigarette. A car comes and gets stuck in the ditch, as the water conceals its depth. The bulldozer driver appears to be nearby by pure chance to pull the car out of the ditch for a handsome fee. By playing this trick, the driver is able to triple his monthly income. But in the process of making money, the bulldozer owner wrecks cars, endangers lives, wastes people's time and damages the road.
Merely the isolated activities of a clever petty criminal? Not so. In Kyiv, each taxi driver must have his driving papers stamped every day and pay a fee of $1. Since there is only one person assigned to stamp these documents, a taxi driver must either spend three hours each day standing in line to get his documents stamped or be prepared to pay a fine. Thus, a single clerk earning $5 per day is able to destroy thousands of hours of labor each working day, leaving a city of four million with a disrupted taxi service. The overall damage from his activity runs into millions of dollars.
But often Ukrainians do not even need anyone to destroy the fruits of their labor: since their labor is not valued, they have learned to destroy its fruits themselves.
Architects are lucky: there are few professions where the results of one's creative labor are visible to so many people, and the work they do can stand for centuries. What is left of the great Egyptian civilization but the pyramids and their contents?
One Ukrainian architect has been fortunate to build a high-profile project in one of Kyiv's central squares. Do you expect him to feel triumphant? No, he called all his friends to say the following: "Do not go there. I know how it was built, and I do not want it to collapse while you are there."
Is it an outrage? It is not. Just stand near a building site at lunchtime. You will see a stream of construction workers going to the nearest cafeteria. Their lunch may take several forms, based on the individual's character, preferences and financial means. It could be 100 grams of vodka and a small package of processed cheese, or it could be a glass of tomato juice and 100 grams of vodka, or it could be 50 grams of vodka, a bowl of soup, and 50 grams of vodka. In America, a store that sells alcoholic beverages to a person in work-clothes runs a serious danger of losing its license. The heartless capitalists do not want their buildings to collapse (assuming that they ever hire alcoholic construction workers, and that is one big assumption).
Here, the problem is too far advanced to merely advocate a restriction on vodka sales. Without a daily dose of "medicine," many workers simply would not be able to function. But the problem needs to be addressed, just as do other issues that threaten the very survival of the Ukrainian nation: AIDS, drug abuse and the collapse of the health care system.
Producers must be protected from the destructive and envious influences of the state and fellow citizens. People were meant to be creative, and a creator always has something to look forward to. The excitement of personal success is much greater than that derived from harming others. Ukrainians working in the West have discovered this, and they are doing very well for themselves and for the societies that are fortunate to have them. Ukraine still has everything it needs to become a prosperous European state, though in places the self-inflicted destruction is showing. We have the choice: either to like ourselves for being nice and deny that Ukraine is in trouble, or to love Ukraine and its people and to work frantically to change the situation here for the better before it is too late.
Information Resources
Central Civil Registrar's Office (ZAGS)
11 Prospekt Peremogy
236 02 43, 236 01 47
U.S. Embassy Web site
Ukrainian Embassy Web site
List of Vital Records offices
List of State Authentication Agencies
U.S. State Department Information on Authentication
Matthew Maly is managing director of ICSGL, a Kyiv business consultancy. His latest book, Russia As It Is: Transformation of a Lose/Lose Society, is available from Amazon.com or from http://matthew-maly.ru.
|
