Why is the Ukraine In Flames?

The news over the last few days has shown scenes of battles in Kiev between police and anti-government protestors.  On Tuesday over 25 people died in the fighting.  The news has been full of details about the battles, but short on explanations of why people are battling.  The explanation, I believe, is very simple.

The Ukraine was once part of the USSR.  When the Soviet empire broke up in the late 1980s and early 1990s many new countries were faced with a choice; continue Soviet era policies or become economically more like Western European countries.  This choice was starkly presented to Ukraine only a short time ago when their president Viktor Yanukovych needed to decide whether to sign a trade agreement with the European Union or take a large Russian loan, which meant the Ukraine would trade primarily with Russia.  President Yanukovych picked the Russian loan, which started the protests.

The anger among many Ukrainians is simple to understand by looking at the following graph.  The graph shows Gross Domestic Product (GDP) per capita after adjusting for inflation.  GDP per capita shows the amount of goods and services the economy produces annually for the average person.  There are lots of lines in the graph to look at but the key is to compare the dotted black line, which tracks the Ukraine, versus all the colored solid lines which represent the neighboring countries.

Twenty five years ago in 1990 Ukraine was in the middle of the economic pack.  Today, the average person in Poland, Romania, Latvia, Lithuania and Belarus is roughly twice as well off as they were 25 years ago.  However, people in the Ukraine are slightly worse off today than in 1990.  Everyone got better off, except for the Ukrainians.  What was the primary difference between Ukraine and the other five countries?  Ukraine’s neighbors all decided to be more integrated with the West, while Ukraine stayed economically tied with Russia.To me the protests show that a person’s relative economic status is just as important as their absolute status.  The problem in Ukraine is not poverty for the average person.  Instead, I believe, it is the anger and resentment of seeing neighbors, friends and relatives who are just outside the country’s borders doing better and expecting to do better in the future, while the Ukrainian economy shows no hope of improvement.  That is the underlying cause of the clashes.