Economist Erik Reinert: not to be a poor country, Ukraine should restore the production industry

What Ukraine needs to do to become rich, exclusive to our channel the International Insight told Erik Reinert is a Norwegian economist and researcher of economic history. He is the author of the book “How rich countries got rich… and why poor countries stay poor”. According to the world Association of economists, it is in the TOP 50 most influential business publications in the last 100 years

Mr. Reinert why Ukraine is poor? Your advice, as a country become rich?

Ukraine was the industrial developed country, but is losing the manufacturing industry. Along with that is losing population. If we look at the days of communism, we thought that communism is different from what is in the West. But if you look – not so different. Because there, and there cultivated the manufacturing industry. And competed and tried to be the first in production. But then, after the fall of the Berlin wall, these lessons are forgotten. Those countries that managed to save the industry, they are all pretty normal, the ones who lost it, – now in poverty. Ukraine is an agrarian country. This potential is all very well. But this is not enough. The problem is that you sell wheat to Italy and buy her spaghetti. You sold the wheat for one, and bought spaghetti for 100. You need to restore the production industry, as well as all the services that go along with production.

In one interview you said that Ukraine is an agricultural colony. How many years you need to stop being of this colony?

You will sign some agreements on free trade, and it seems to me that you are moving in the wrong direction. It is difficult to say where this will lead. Ukraine chooses agricultural exports, but the EU gives little quota. Are you trying to play this game, but you stop quota. You in a very unfair game. I think you have jumped on the ideology without understanding the consequences of this ideology. And this is understandable. Even the United States understands that free trade is not in their interests. Trump and Sanders. If it doesn’t even work for US, so how will it work for Ukraine?

Cooperation with the IMF. There are two theories: one says that we need the money, the other – what we can without them. What you support?

What is happening now? You in debt because of the trade deficit. It’s easy to take debt. You should try to live without these debt. And live, in this sense, without the IMF. Because they are driving Ukraine into large debts. Their expensive loans has caused many problems in Europe in 1930. And can still cause problems. Ukraine is not the only country. Georgia is in a similar situation, with a large trade deficit. Need to get out of this debt trap. Ukraine is immersed in it, and it’s only getting worse. You can look at it in Europe: countries that are in debt (apart from Greece, Italy) have a big problem. To be a debt slave is not the best idea.

It’s not so easy to live without loans. You to us as an experienced economist tell me, how many years you need to give up the money the IMF and whether Ukraine capacity: budget, money to live without them?

Understanding that economic and political elites, I think the first is to let them know about this issue, the IMF not only in Ukraine but in other countries behaving very responsibly. They create a lot of debt. These debts in many countries are paid. I think the first thing is the political and economic awareness that the alternative to debt is to produce more ourselves.

Have you heard about the so-called Marshall plan for Ukraine, which provides about $ 5 billion annually to help the state. Ukraine actually need such a plan?

Think needed, but there is a lack of understanding of what constitutes the so-called Marshall plan. It was about the money? Yes! But he was about the change in the economic structure of the country. Americans found in 1947 that the best way to stop communism is to make adjacent countries with Communist – from South Korea to Norway is rich. The Marshall plan was about the industrialization of countries from South Korea to Norway. The Marshall plan is a good idea, but many people think it’s about money. And he actually – about the economic structure and its changes, which actually need the money. If people sat down together and looked than in fact was the Marshall plan and what did South Korea – this is the perfect plan. Look at what South Korea and try to copy – it would be my advice.

Thanks for the interview, Mr. Reinert!

Thank You!

Interviewed by Elina Beketova project 112 International Insight