Weekend Economists Volvemos a Puerto Rico May 22-25, 2015

[MattSh]

42. The Economist (not the Weekend one) misses the mark on this one...

My Note: From a few different descriptions I've read, Poland was designed specifically as an attraction to draw other former Warsaw Bloc countries to the western side. The west could have either tried to treat all former bloc countries equally, which would have failed because nobody wanted to pay for that, or to use one country, in this case Poland, as an attraction, a sort of a Pola-Disney, which the other nations would have observed in awe and then would decide that they wanted to be a part of that. The fact is that there would only be one Pola-Disney; that was the original and the only plan.

Ukraine - Slipping away from the West

IN A LEADER this week we argue that the West should treat Ukraine like it treated Poland in the early 1990s. Poland has had bucketloads of aid and economic assistance thrown at it since the 1990s, its economy booming as a result. Ukraine, on the other hand, has recieved hardly any at all. Now both its politics and its economy are in a mess.

Here are a few charts that show how the West has got it wrong with Ukraine. Firstly, as we argued in this week's leader:

In the early 1990s Poland wanted a European, not a Russian, future. The West saw its chance. From 1990 to 2000 Poland received a bucket-load of aid—more than any other country, in fact, except Egypt, India and China [see first chart]. There was plenty of debt relief, reducing Poland’s external-debt-to-GDP ratio from 83% in 1990 to 56% a few years later. All this was tied to strong reforms, like putting the economy in private hands

In the 1990s, Ukraine did not benefit from this help. Instead, its economy was mired in botched privatisations and corruption (all of this is explained well in a new book by Anders Aslund of the Atlantic Council, a think-tank). It made much less progress in reforms than did Poland (see the group of charts below).

All this meant that, over time, the economic fortunes of Poland and Ukraine diverged rapidly. In 1990, Poland and Ukraine had similar levels of GDP per head. Now Poland’s is three times higher.

http://www.economist.com/blogs/freeexchange/2015/05/ukraine