Ukraine — Economic history
What are the strengths of Ukraine’s economy? How does its history affect today’s wealth? What is the role of heavy industry?
From Catherine the Great 1762 until the end of the Russian Empire 1917
When Catherine II. was elected Empress of the Russian Empire in 1762, the political opposition vanished within few years. Under her command, the Russian army conquered Southern Ukraine with its highly fertile black earth soil to establish a “granary” and export base for the Russian Empire. On the shore of the black sea, Odessa was founded in 1794. Its port became the second most important trade center in the czardom behind the port of St. Petersburg. In Southeastern Ukraine, rich resources, coal at the Donbass and iron ore at the Dnjepr, made the heavy industry grow into the most important engine of industrialization in Russia, which furthermore attracted many Russian workers to immigrate to the Ukrainian region around the Donbass and Dnjepr. In Kiew, trade and administration took place and the national railway conveyed goods to and from the capital.
Even though modernization brought more welfare in the cities, mainly rich people and Russians profited. To illustrate, in 1897, only one out of ten citizens of Odessa was Ukrainian. Most of them kept on being farmers and many of them lived in poverty, partly due to their illiteracy. Twenty years later, the agrarian revolution and growing opposition led to the end of the Russian Empire. On January 12, 1918, the Ukrainians proclaimed their independency. During following years, before cofounding the Soviet Union, many of today’s identities have been established; the currency Hrywnja, the nation anthem Schtsche ne wmerla Ukrajina or the Flag of the Ukrainian Trade Fleet.
From independency 1918 until exit from USSR 1991
With the foundation of the Soviet Union in 1922, modernization increased nationwide through industrialization, urbanization and alphabetization. The heavy industry expands and the DniproHES becomes the third largest hydropower plant worldwide. When Stalin took power over the USSR in 1927, he forced collectivization upon the Ukrainian farmers and they were degraded to become farm workers on their own land. Furthermore, he forced the farmers to handover their harvest, to share the crop within the USSR. This led to the great famine called Holodomor, also seen as the Holocaust of 1932 to the Ukrainian population; around three million farmers lost their life.
During World War II, Ukraine is the central stage — every fifth Ukrainian dies during the brutal battles followed by massive economic decline. The war plan of the Nazis included the deportation of over two million Ukrainians and the killing of all Jews. The Nazis let the inferior Ukrainians work for them, with the cruel objectives of keeping education and birth rate low among the local population. After the war, widespread poverty partly impeded the process of rehabilitation. Cities and heavy industry have been reconstructed; however, agriculture and consumer goods struggled to rise again.
From economic shock 1992 until financial crisis 2007
After the exit of the USSR, Ukraine suffered from a heavy economic crisis, which also stroke many other European countries. On top of that, the devastating implications of the Chernobyl accident 1986 had debilitating effects on parts of agriculture in the area in and around the catastrophe. The situation stabilized towards the end of the nineties, after the GDP had a massive decrease of 60% between 1992 and 1995. The millennium change brought long-desired upturn and the GDP grew by around 7% annually ever since. After the change of government in 2004, whereby Juschtschenko was elected as president, foreign investors drew more trust and investments in agricultural area became more attractive. With the finance crisis starting in 2007, the currency Hrywnja and the banking sector were destabilized and the International Monetary Fund granted a 16.4 billion loan in three tranches, of which the third one has never been disbursed due to non-fulfilment of conditions by the Ukrainian government. Nevertheless, state bankruptcy had been averted.
Economy today and future potential
In the recent years, Ukraine could have had a general economic recovery. However, during the presidency of Janukowytsch from 2010 until 2014, state corruption led to a negative sentiment among investors. Furthermore, the Crimean war against Russia intensified the economic recession. As the Ukraine is heavily depending on gas imports from Russia because of its energy intensive economy, the iron ore industry suffered even more. Since 2016, the economy is recovering and growing gradually.
The Ukrainian economy has great potential due to its attractive sales market, an improving educational system and many different resources like agriculture are, oil, iron and coal. Additionally, the position between Western Europe and Russia is strategically advantageous, as Russian gas pipes connected to Europe run through Ukrainian territory.
To conclude, Ukraine has a remarkable economic basis but nonetheless still feels the aftereffects of its history and actual problems, which results in Ukraine being one of the poorest countries in Europe measured on per capita income.
References
Bundeszentrale für politische Bildung. (2015, August 8). Geschichte der Ukraine im Überblick. Retrieved from bpb.de: http://www.bpb.de/izpb/209719/geschichte-der-ukraine-im-ueberblick?p=all
LIPortal (2018). Ukraine — Wirtschaft im Überblick. Retrieved May 9, 2018, from LIPortal: https://www.liportal.de/ukraine/wirtschaft-entwicklung/
What’s up next? Stay tuned for next Sunday’s post about Tourism in Ukraine and Odessa!
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Kevin S.
Studyweek Odessa — A project from nine students of HTW Chur
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