COMMENTARY: Of miners, budgets... and dinosaurs (02/25/96)

COMMENTARY: Of miners, budgets... and dinosaurs

by Markian Bilynskyj

The severest winter in recent memory has brought into sharp relief some of the enduring tensions within Ukrainian politics and society. On February 1 coal miners launched an indefinite strike, while friction between the executive and legislative branches surfaced again over the pace and direction of economic reforms. A recent Socis-Gallup poll put the finishing touches to this bleak portrait by revealing that 72 percent of respondents believed they were struggling economically, while 27 percent were just managing to cope. Only 1 percent were satisfied with their lot.

Generally, the miners have made economic demands. They are insistent that the government pay their salary arrears and that state subsidies to the industry be continued. The 1996 budget, which was again reviewed by the Supreme Council last week, anticipates cuts in subsidies. The miners had hoped for sympathy strikes in other key sectors of the economy. However, post-Soviet worker solidarity has so far taken a back seat to the overwhelming daily need to make ends meet.

On February 2, the Supreme Council set the government a deadline to find a solution to the problem of unpaid salaries. On February 7, President Leonid Kuchma issued a decree "On the Fundamental Restructuring of the Coal Industry." Speaking at a press briefing that same day, the president's chief-of-staff, Dmytro Tabachnyk, stated that the government owed the miners very little in the form of unmet budget outlays. The problem, he argued, was that the industry had fallen afoul of the chronic and debilitating payments crisis that has ravaged Ukraine's production potential across the board. He blamed non-paying consumers for the coal miners' plight.

Appearing at a press conference the following day, Prime Minister Yevhen Marchuk reiterated this view. He stressed that the restructuring of the coal industry, which is to be implemented with the assistance of the World Bank, had been planned for some time. Mr. Marchuk blamed the present state of affairs principally on the failure to implement such a program sooner.

Nevertheless, the government agreed to cover part of the salary debt, to subsidize some unprofitable mines temporarily and to provide limited credits to some of the more critical debtors, such as the Ministry of Energy, so that they could begin repaying the miners. These funds are to come from "non-inflationary" sources such as the fuel and energy fund, commercial bank credits and tax concessions to miners. On February 12, Mr. Marchuk reiterated that the government could do no more for the miners at present and that negotiations on other issues would commence only after the miners returned to work.

The miners' strike poses an extremely serious threat to the already badly listing ship that is the Ukrainian economy. The inflationary consequences of satisfying the miners' demands through reflexive credit emissions would deal a crippling blow to the government's plans to slow substantially the decline in industrial production this year.

Just as threatening is the fact that the longer the strike lasts, the more it will impact other areas of the economy. Coal stocks at Ukraine's thermal power stations, for example, were dangerously low even during the off-peak summer season. On February 13, the Russian and Ukrainian electricity grids were de-coupled because Ukrainian power stations were working at less than 30 percent of their generating capacity. Much of Ukrainian industry is already working under a strict energy conservation regime.

No less significant is the potential threat to the budget. The budget debate within the Parliament - let alone the negotiations between the Parliament and the government - has been especially acrimonious. The budget is under siege from the agricultural lobby and by groups at both ends of the political spectrum determined to raise social security expenditures even though the budgetary pie is shrinking. The miners' claims make the debate still more complex.

Although the government has been careful to avoid making the point explicitly, a bloated budget deficit would also jeopardize the already delayed next slice of IMF stand-by credits that are so important to President Kuchma's reforms. The adoption of the budget, something Mr. Marchuk has said must happen before the April IMF board meeting, could be further delayed by the insistence of some deputies that the 1996 Program for Social Development be approved first and that the budget should then be shaped around it. The government argues, conversely, that the program should be tailored to the budget.

The importance of fiscal discipline was underlined by Mr. Marchuk at his press conference when he pointed out that meeting the requests of, for example, the mining and farming sectors would be "a catastrophe for the whole economy." The Ukrainian government, therefore, appears to have drawn a line in concessions to the miners.

The Left, particularly the still quite disciplined Communists, has taken to championing the cause of the miners with considerable gusto. Buoyed by the prospect of a Communist victory in the forthcoming Russian presidential elections, they have egged on the more radical miners to add political demands to their economic grievances. Broadly speaking, the Left attributes the problems of the mining sector and of the Ukrainian economy as a whole to the machinations of Western business interests manipulating international financial institutions to de-industrialize Ukraine and remove it as a potential competitor. This view is largely shared by the Parliament's Socialist chairman, Oleksandr Moroz. The 1996 budget submitted by the government is, so the argument goes, little more than a means to this end.

(There are, however, very noticeable strains within the Left over the desirable mix of compromise and confrontation for pursuing their agenda. For example, two of the Socialist Party's most vociferous ideologues were recently expelled for trying to force the party to condemn both Mr. Moroz and the leader of the Socialist faction in the Parliament, Ivan Chyzh, for having deviated from a genuinely socialist path to a social-democratic one.)

The government has been trying to outflank the Left in the contest for the largely indifferent hearts and minds of the population by referring to the strike's supposedly crude political motives. Government spokesmen have pointed to the fact that the strike actions had been coordinated with Russian miners. They have also claimed that the miners had been told, and had accepted in negotiations prior to the strike, that their demands would be partially met. The official and pro-presidential media have been quick to point out the "sinister" political dimension - often, perhaps, at the expense of a genuine discussion of the mining industry's problems.

Whatever their degree of collusion in initiating the strikes, one thing is clear: the miners' strike has revived the Left's campaign to disrupt and reverse the government's reforms following the failure of their so-called "October Offensive." (Then again, perhaps this should not have come as too much of a surprise at a time when one of the most popular exhibitions in Kyiv is "The Return of the Dinosaurs.")

Almost inevitably, the simmering confrontation between the president and the Parliament chairman has also re-emerged during this tense period. On February 6, the president sent an open letter to the Supreme Council in which he complained about its prevarication in adopting key economic legislation. He claimed that only three out of 62 pieces of draft legislation submitted by the government for implementation of the reform program ratified by the Parliament last October had been adopted. "Especially worrying," Mr. Kuchma noted, "was the situation concerning the 1996 budget."

The pretext for the letter was most likely a public disagreement between the president and the Parliament chairman over some fundamental aspects of the president's 1994 agricultural reform initiative. Addressing a February 6 meeting of local government officials - whom Mr. Moroz had a day earlier advised to disobey the decree - an exasperated President Kuchma stated that "Oleksander Moroz has to decide whether he is the head of the Parliament or head of the Socialist Party." The letter was supposed to have been read out by Viktor Musiyaka, the president's official representative to the Supreme Council - a curious and unenviable position for a deputy - at the beginning of the plenary session. Mr. Moroz, much to the administration's displeasure, tried unsuccessfully to prevent his appearance.

The lack of consensus within the Ukrainian political elite(s) over many of the most fundamental aspects of state-building virtually precludes genuine consensus-making. More than is usually the case, matters are decided by the amount of political firepower the contending sides can bring to bear on a particular issue. Many observers believe that the adoption of a constitution will dispel these problems, but the constitution per se cannot force a consensus. It should be the product of one.

Judging by the Left's renewed activity on this front as well, the adoption of a constitution might prove to be much more acrimonious than it promised to be even a short while ago. Episodes like the miners' strike will continue to be used as tools for leveraging political concessions.

It was the miners who in September 1993 initiated the process leading to the demise of the previous president, government and Parliament. But history is unlikely to repeat itself, if only because experience has taught Ukrainians that change does not inevitably bring progress.

Markian Bilynskyj is director of the Pylyp Orlyk Institute for Democracy based in Kyiv.

| Home Page |