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Seven years into its life as an independent state, Ukraine seems to be lagging behind other post-Soviet countries in economic development. News stories describing living conditions and political infrastructure are indicative of an economy slow to change. Data from the World Bank help identify relationships between economic freedom and economic growth. Read news accounts and fill in the chart below to help identify a course of action for the Ukrainians.

KEY CONCEPTS

Command Economy, Economic Freedom, Economic Growth, Trade-off

STUDENTS WILL

  • Analyze data to explain the relationship between economic freedom and economic growth in the transition economies.

INTRODUCTION

UkraineSeven years into its life as an independent state, Ukraine seems to be lagging behind other post-Soviet countries in economic development. News stories describing living conditions and political infrastructure are indicative of an economy slow to change. Data from the World Bank help identify relationships between economic freedom and economic growth. Read news accounts and fill in the chart below to help identify a course of action for the Ukrainians.

RESOURCES

  • The World Bank: Kyiv public buildings lead Ukraine's push for energy conservatism (July 2006).
    www.worldbank.org/en/country/ukraine
     
  • Radio Free Europe/Radio Liberty: Seven years into its post-Soviet experience as an independent state, Ukraine has distinguished itself as much by what it has avoided as by what it has accomplished. On the one hand, the country has managed to escape the deep ethnic divisions many predicted and, for the time being at least, has sidestepped the near total economic and social collapse Russia has undergone. But at the same time, Ukraine has also avoided many of the critical reforms necessary to pave the way for long-term prosperity.
    www.infoukes.com/rfe-ukraine/1998/1130.html
     
  • Economic Liberation Worksheet: The World Bank defines economic liberalization as: - Freeing prices from government controls. -Opening the economy to international trade. - Making it easy to start new businesses. This worksheet lists countries from top to bottom in degree of economic liberalization Students are asked to find GDP data for the years indicated.
    www.econedlink.org/lessons/docs_lessons/138_liberalization1.pdf

PROCESS

Visit the World Bank web site in the Ukraine and read "K yiv Public Buildings Lead Ukraine's Push for Energy Conservation. "

  • What allowed Ukranians to ignore energy consumption during the Soviet Era?
    [...Until recently, Ukrainians typically used only one measuring device at home: the electricity meter. No attention was paid to devices that measure hot and cold water consumption, gas, or heating. The reason is simple: during Soviet times, energy was so cheap that it wasn't necessary to monitor its use...]
  • What is being done in public buildings to improve energy efficiency?
    [The main goal of the Project was to enhance the level of energy efficiency of public buildings through technical improvements and a rational pricing policy for heating. The Project was also aimed at promoting the development of the local energy conservation market and related service industries that only began operating in Ukraine at that time.]
  • How is the central heating system like the economic system of central planning and control?  
    [Control over changes in outcomes (temperature or economic) come from a centralized place. Changes cannot be made without first changing the inputs which come from the central location.]


To learn more about how Ukraine is facing economic reform, go to the Radio Free Europe/Radio Liberty site and read "Ukraine's Lack of Direction Jeopardizes Reform."

  • What are the characteristics of the Ukrainian post-Soviet economy? [Has escaped deep ethnic divisions and economic collapse. Faces pension and wage arrears, rampant organized crime, and widespread official corruption.]
  • How did the Ukrainian government use incentives to enforce tax collection? [Prime Minister ordered 1,500 business executives to a tent camp outside Kiev until they paid delinquent taxes.]
  • What are the characteristics of the Poland economy? [10% annual private sector growth, unemployment under 10%, increased total foreign investment]
  • How did Poland have to pay for its success? [Faced nearly 3 years of economic suffering and social dislocation.]


Have students complete the Economic Liberation Worksheet to learn about Economic Liberalization.

  • What seems to be the relationship between economic liberalization and economic growth? [Positive, or direct.]


Initially, nations that allowed more economic freedom experienced decline (contraction) when more economically liberal policies were adopted. Those that allowed more economic freedom recovered more quickly than those that allowed less economic freedom. Why was this the case?

  • Why might liberalization foster economic growth? [Answers vary.]
  • If you were economic advisor to the Ukrainian government, what would you recommend?[Answers vary.]

EDUCATOR REVIEWS