April is the Cruelest Month: the Coming Austerity Measures and Elections in Ukraine

Photo Credit: REUTERS/Anatolii Stepanov
Photo Credit: REUTERS/Anatolii Stepanov

The International Monetary Fund has offered Ukraine a two-year bailout package of $18 billion in return for steep economic reforms. The long-term goal of the bailout package is to stabilize a Ukrainian economy that is running up expenses and moving toward a debt default. It is hoped that economic stability in Ukraine will lead to the political stability that can then ease Ukraine’s transition to democracy, and more importantly, away from Russia. By opening up to the IMF deal, Ukraine will signal to nations like the US and Japan that they are committed to restructuring their economy and are open to investment. For example, the United States Congress is working on a bill for $1 billion in aid to Ukraine as well as economic sanctions against Russia. The European Union has put $15 billion on the table. It total, Ukraine is in position to receive around $27 billion in aid.

The downside to these deals is that the enforced austerity measures will likely hurt the average Ukrainian citizen by increasing gas prices by 50% and inflating the currency, the hryvnia, by somewhere between 12% and 14%. Therefore, we may see the cost of living rise while the purchasing power of the hryvnia plummets. Ukraine’s interim Prime Minster Arseniy P. Yatsenyuk explained that there would be a minimum-wage freeze and an increase in taxes for Ukraine’s largest companies. All of this spells out hard times for Ukraine in the coming years. But consider the result if Ukraine were not to accept the austerity measures. As The New York Times reported, Yatsenyuk “told the Parliament on Thursday that the country was ‘on the brink of economic and financial bankruptcy’ and that gross domestic product could drop 10 percent this year unless urgent steps were taken in conjunction with the fund.” With such instability, Ukraine’s interim government would not have the time or the legitimacy to set up the proper institutions before the planned election in May.

Photo Credit: Genya Savilov/AFP/Getty Images
Photo Credit: Genya Savilov/AFP/Getty Images

The top candidates for the election include former Prime Minister Yulia V. Tymoshenko, billionaire businessman Petro Poroshenko, and Parliamentary leader as well as former professional boxer Vitali V. Klitscho. Tymoshenko, who was born in the industrial and Russian-leaning eastern Ukraine, has support from the western and central provinces. However, it is Poroshenko and Klitscho who lead in the polls. No matter the result in May, the next president of Ukraine is set to face a difficult transition in all aspects of society. Somehow, he or she must ease the pains of economic liberalization, consolidate political factions, and reign in nationalist as well as pro-Russian sentiments. International aid may help, but the real battle for Ukrainian independence must be fought from within. It is a fight to defeat the legacy of authoritarianism; a fight that Ukraine desperately needs to win.


Do economic sanctions work?

Over the course of the past week the world has witnessed the power of economic sanctions. Iran’s economy is crumbling under the restrictions imposed by the EU, UN, and US. Recently, the Rial has lost 40% of its value after having already fallen significantly since the turn of the year. This devaluation is causing massive price hikes for middle and lower class Iranians who have taken to streets of Tehran to protest which in some cases have sparked riots.

That being said, we have yet to see whether a rollback or pause in Iran’s nuclear program will follow. It seems, at least, that for now Israel is calming down a little and is shifting its focus from military action to economic oppression.

Economist and international relation scholars alike have long debated the effects of sanctions. While some find the use of sanctions overly crude and exceedingly slow to affect any significant behavioral change. Others argue that even the mere threat of sanctions can change an offending countries behavior – and that this effect is too often overlooked. While the last four years of sanctions (or the ones in place since 1979) have not discouraged Iran’s vigor in further pursuing the enrichment of nuclear fuel, additional American sanctions, along with an oil embargo by Europe and Japan, did further undercut the government by squeezing its most important source of revenue: oil sales.

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Using Philanthropy and Partnerships to Drive Global Prosperity

by Charlene Chan and Michael French

During a time in which development aid is drastically changing, three experts in the development field convened to discuss the shift of aid away from official government channels to private giving. On April 2nd, the Hudson Institute’s Center for Global Prosperity (CGP), in conjunction with Georgetown University, held an event featuring Dr. Carol Adelman of CGP, Dr. Caroline Anstey of the World Bank, and Dr. Carol Lancaster of Georgetown’s School of Foreign Service. The esteemed panel discussed how philanthropy, remittances, and private capital flows have greatly outstripped official government aid, as well as the implications of these findings for the future of development. Besides being a lively discussion of a noteworthy and important topic, the event also marked the release of CGP’s 2012 Index of Global Philanthropy and Remittances.  Continue reading

Sec-u-lar-ism (n.) –Separation of church and state

– How Prime Minister Erdogan’s revised interpretation of secularism has reignited the debate on the role of religion in Turkey

Prime Minister Recep-Tayyip Erdogan

As the world watched the 20th become the 21st century 11 years ago, the Turkish government strived to reach new levels with their economy and achieve relevancy on the global scale.  Recep-Tayyip Erdogan, former mayor of Istanbul, and current Prime Minister of Turkey was at the forefront of an economic charge that an Islamic nation had yet to achieve.  Once he took the helm of the Turkish government in 2003, Erdogan started to implement a number of reforms that, while difficult to achieve, propelled Turkey into a global economic success.  However, during this time of national economic success, the country has become divided in their support of Erdogan’s view of religion and its role in society. Continue reading