Theses for a Plan and Strategy to Rebuild Ukraine (Part 3). Formula for Economic Growth

Today, after 12 years of resistance against Russian aggression and authoritarianism, avoiding the abyss and restoring the strength of the state and society is only possible under one key strategic condition: THE REVIVAL OF UKRAINE'S ECONOMY.

What needs to be done? What are the markers and key elements of Ukraine's economic growth that the Ukrainian people should be aware of and use to evaluate not the words, but the actual actions of the Ukrainian government?

The answer to this question is provided by economic SCIENCE.

Leading economists have formulated the formula for macroeconomic growth in any country in the world:

CAPITAL + LABOUR (PRODUCTIVE FORCES) (Karl Marx, 1848)

+ TECHNOLOGICAL PROGRESS (Robert Solow, 1987)

+ KNOWLEDGE, INNOVATION and HUMAN CAPITAL (based on STATE support: EDUCATION, SCIENCE and HEALTH CARE), (Paul Romer, 1990, 2018)

+ SCIENTIFIC and ECOLOGICAL FACTORS OF INFLUENCE – KNOWLEDGE and NATURE on the ECONOMY, (William Nordhaus, 2018).

To rephrase, this formula can be presented as follows:

CAPITAL + PRODUCTIVE FORCES + TECHNOLOGIES + INNOVATIONS + HUMAN CAPITAL + ECOLOGY is a generalised formula for economic growth in any country in the world, implemented on the basis of state support and protection of national interests in the fields of science, education, health care, demography and ecology.



Back in the 19th century, Karl Marx introduced into economic analysis the idea that ECONOMIC growth is influenced not only by CAPITAL, but also by LABOUR – PRODUCTIVE FORCES.

For example, the Ukrainian government, which has one of the richest resource bases in the world, considers regular borrowings from the IMF a success. At the same time, this is not even CAPITAL for investment in the economy. It is financial 'squandering' and oppressive DEBTS for future generations of Ukrainians. This is a verdict on the incompetence and unprofessionalism of state management.

With Ukraine's powerful resource base and one of the most educated and hard-working human resources in Europe, the government should invest in high technology and bring Ukraine to the forefront of scientific and innovative development.

The liberal economic model pursued by politically inexperienced and corrupt actors must finally be recognised as nationally destructive and anti-state.

It has already led to the loss of Ukraine's once highly developed industrial potential and an unacceptable level of dependence on external donors.

For example, the English economist William Petty assessed the strength of a state according to two criteria: its ability to produce goods for foreign markets and its ability to protect its own markets. Everything else is only justified by these two basic factors.

With regard to the policies of other states to protect their most valuable asset – their national human potential – it is worth mentioning Germany and Poland again, where millions of Ukrainians have already relocated. Germany, for example, has tuition-free higher education and has abolished preferences for German citizens when hiring. Its far-left and far-right politicians sometimes complain about the significant costs associated with the war in Ukraine, but at the same time, they do not take into account that Ukrainian PRODUCTIVE FORCES also work for its economy.

Ukrainian politicians must remember that inaction in defending national economic interests under the banner of libertarianism in the current conditions borders on treason. With the current fiscal and tax policy in Ukraine, even without the war factor, the outflow of citizens to countries where there are free jobs with average monthly wages that are several times higher than in Ukraine will always be a disaster for the Ukrainian economy...

As for technological progress, since 1987, the ECONOMIC GROWTH FORMULA has gained a third important component, thanks to Nobel Prize winner Robert Solow. In addition to CAPITAL and LABOUR, it has been supplemented by TECHNOLOGICAL PROGRESS. China, in particular, has demonstrated the effectiveness of this in recent decades.

This stands in contrast to the opposite example of the activities of Ukrainian governments. Their annual work programmes have for decades lacked targeted, sectoral programmes for investment, development and technological modernisation of strategic industries. In particular, in rocket, aircraft, ship, and tank building, and in the deep processing and production of titanium, lithium, zirconium, and rare-earth products. In the creation of national production of chips and state-of-the-art radio-electronic and bioengineering products...

In 2018, American economists William Nordhaus and Paul Romer also received the Nobel Prize in Economics. They developed mathematical models of macroeconomic analysis to predict ECONOMIC GROWTH in modern conditions (https://www.holosameryky.com/a/nobel-z-economiky/4604124.html).

The formula for its growth was supplemented with two new elements that influence economic growth in modern conditions. Thus, former World Bank Chief Economist Paul Romer proved that KNOWLEDGE can be another catalyst for a country's long-term economic growth.

He developed a theory stating that TECHNOLOGICAL INNOVATIONS and KNOWLEDGE are important factors in modern PRODUCTION, and that the accumulation of knowledge has a positive impact on LABOUR PRODUCTIVITY and CAPITAL.

Romer's 1990 economic analysis shows that KNOWLEDGE, INNOVATION and HUMAN CAPITAL are important factors in the growth of modern economies. Economic growth rates can increase with GOVERNMENT support for EDUCATION and SCIENCE, HEALTH CARE, and stronger INNOVATION incentives, based on state protectionism.

He also proved that an unregulated liberal market is not capable of truly valuing INNOVATION, even if it produces it. Only state regulation and protectionism can support the growth of incentives for innovation through subsidies for research and development, long-term fundamental research and the development of a protected patent system.

Nordhaus also supplemented the Solow model with an analysis of the consequences and impact of global climate change and global warming on the development of modern economies. He proposed including an ECOLOGICAL factor in macroeconomic analysis models, in particular through the idea of additional taxation of carbon emissions as a tool to combat global warming.

Ukrainian governments must finally realise that the developed world and modern economic science operate with at least five key indicators for macroeconomic analysis and economic growth forecasting. Therefore, returning to 19th-century approaches and using indicators of 'economic growth' in the form of foreign LOANS and SALES of national wealth and strategic resources is, at best, a manifestation of economic ignorance.

At worst, it is NATIONAL TREASON AND CORRUPTION on the part of the AUTHORITIES. Under the false slogan that 'the state is not an effective owner,' they are selling off high-tech, scientifically supported, and strategic resource-based state-owned enterprises. This destroys the foundations of Ukraine's economic growth.

Without a strong and self-sufficient ECONOMY capable of fully supporting our ARMY, DIPLOMACY and INFORMATION influence in the world, Ukraine's statehood will once again be under mortal threat.

The accumulated experience of state-building should finally demonstrate to our policymakers that Ukraine's development strategy can only be the following: building a developed form of European democracy, with a strong middle class, a developed civil society, a market economy and state regulation of strategically important industries, comprehensive protection of national producers, including in agriculture, and special care for science, education, health care and the demographics of the Ukrainian people, as the basis for a powerful economy, army and defence potential of Ukraine.

And finally, a word of wisdom: '...The courage of ignorance does not exempt one from responsibility. And misguided ambitions, without the relevant experience and education, lead to crimes...'.

Theses for a Plan and Strategy to Rebuild Ukraine (Part 1)

Theses for a Plan and Strategy to Rebuild Ukrainian Economy (Part 2)

The author's blog is a material that reflects the author's point of view solely. The text of the blog does not claim to be objective and comprehensive in covering the topic it raises. The editorial staff of the Ukrainska Pravda (UP) is not responsible for the accuracy and interpretation of the information provided and acts solely as a carrier. The views of the UP editorial staff may not coincide with those of the blog author.

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