Don’t Believe the Trump Administration’s Lies About Ukrainian Corruption
Far from drowning in graft, the country’s record is getting better and better.
There is one thing U.S. President Donald Trump, Russian President Vladimir Putin, Hungarian Prime Minister Viktor Orban, U.S. presidential hopeful Joe Biden, State Department diplomats, and even the secret whistleblower who brought Trump’s alleged quid pro quo with Ukraine to light have in common: They all share the view that Ukraine is riddled with corruption.
So, just how bad is it? Corruption, like bad intentions, is inherently unmeasurable, but three analytic proxies give a sense of how widespread a problem it is: Transparency International’s Corruption Perceptions Index, the World Bank’s Ease of Doing Business Index, and public opinion surveys in Ukraine.
In Transparency International’s 2018 ranking, the latest available, Ukraine ranks 120th out of 180 countries, with a score of 32 out of a possible 100 points. That may look bad, but there has been a positive trend since 2014, when Ukraine was 142nd and its score was 26.
Clearly, Ukraine still has a long way to go to reach the top, but, no less clearly, it’s been making steady progress since the 2014 revolution. Further, Transparency International doesn’t measure actual corruption; it measures perceptions of corruption among the public. And that means that increased criminal prosecutions, coupled with public awareness campaigns and investigative journalism focused on corruption, can actually lead to a lower score, even as actual graft is on the wane.
In the World Bank’s 2019 Ease of Doing Business ranking, Ukraine stands 71st out of 190 countries, with a score of 68.25 out of a possible 100 points. Again, the trend is more impressive than the result: Back in the 2014 report, Ukraine was 112th out of 189 countries. It’s climbed 41 places in just five years. It also points to a paradox. Given high perceptions of corruption, it would make sense for Ukraine’s score for ease of doing business to be low. Instead, it’s quite respectable (the frontrunner, New Zealand, comes in at 86.59). This may mean that subjective perceptions of corruption in Ukraine exceed the objective reality.
And that brings us to a third proxy: public opinion surveys. And here, there’s a disconnect. The Euromaidan revolution marked a turning point in real corruption: The Viktor Yanukovych regime, which had purloined as much as $15 billion from the state, was ousted in 2014 and replaced by the far cleaner Petro Poroshenko administration, which curtailed some corruption and improved the business climate. Further progress is being made under Ukraine’s new president, Volodymyr Zelensky, who is pushing for more effective prosecution of corrupt officials.
But polling of Ukrainians does not take this objective reality into account. In a 2015 study, the Kiev International Institute of Sociology found that “people perceive corruption in the state sector as growing, though this conclusion is not backed by actual experiences.” Moreover, in that study, only 20.5 percent of Ukrainians said they experienced corruption daily, weekly, or monthly; 45.1 percent experienced it yearly or a few times per year; and 16.5 percent never experienced it.
A 2018 anti-corruption poll from the U.S. Agency for International Development and the Enhance Non-Governmental Actors and Grassroots Engagement program came to similar conclusions. According to its findings, 92.5 percent of respondents thought corruption was a very serious or rather serious issue, while 86.7 percent thought it was very common or rather common. On the other hand, only 41.5 percent of households encountered corruption in the past 12 months: Of that number, 30.6 percent of respondents said they had personal experiences with corruption, while 10.9 percent had family members who experienced corruption. Significantly, 53.1 percent encountered no corruption.
Ukrainians, in other words, tended to overstate the amount of corruption in their country. They also tended to say they saw it in the highest levels of government, about which their knowledge came primarily from the endless exposés that the Ukrainian media loves to indulge in. In reality, government corruption has declined markedly.
A recent report by Ukraine’s Institute for Economic Research and Policy Consulting quantified the economic effects of reforms undertaken by the Ukrainian government since 2014. The report, which was written by a team of Ukrainian economists working with a panel of Western economists, had stark findings.
Reforms now in place have reduced grand corruption—that is, large systemic schemes that cost the economy hundreds of millions of dollars or more—by $6 billion per year, or about 5 percent of Ukraine’s GDP. Reforms and increased enforcement by tax and revenue authorities shrank the shadow economy from 43 percent of GDP in 2014 to 33 percent by the end of 2017 and brought in an extra $1 billion per year. Changes to the gas industry drastically reduced the gap between imported gas and artificially lower domestic prices and eliminated price arbitrage between the two price points, which had led to massive rents that allowed corrupt officials to steal billions of dollars at the state’s expense. All in all, the gas sector reforms amounted to approximately $3 billion in savings per year. Open data reform not only eliminated a number of rent-seeking schemes that cost the state tens of millions of dollars but also generated $700 million dollars in new income. And an electronic public procurement system called ProZorro (a pun on the Ukrainian word for transparent) has drastically reduced corruption in bidding for government contracts, with $1.1 billion in annual revenues for the state.
The momentum for change grows. Under Zelensky, Max Nefyodov, Ukraine’s hipster IT genius who created ProZorro, is tackling corruption in the customs service. The country now has an active National Anti-Corruption Bureau, a new anti-corruption court, and one of the world’s most transparent annual income declaration systems, in which nearly 2 million government officials are required to disclose all their holdings in an online database open to the public and to detail all their assets as well as personal possessions valued above $3,000.
The economic influence of Ukraine’s oligarchs, meanwhile, is overstated. Around 50 percent of private-sector employment is generated by workers in small and medium enterprises. Another quarter is represented by the state economy. Moreover, there are now nearly 2 million registered individual entrepreneurs, driving a great deal of economic activity and innovation. Many of these are freelance IT specialists and programmers, small-scale vendors, and service providers. They are an important indicator that there is a strong entrepreneurial spirit in the country, which runs counter to the corrupt oligarchy narrative.
This is not the record of a hopeless case.
Obviously, Ukraine suffers from serious corruption, but the popular impression of a nation drowning in graft is more a reflection of Trump’s lawyer Rudy Giuliani’s associations with dodgy oligarchs and expat intermediaries—as well as the well-compensated dalliance of Biden’s son Hunter with a company owned by a powerful former government official—than of Ukrainians’ lived reality.
Instead, citizens are enjoying an economy growing at around an annual 4 percent clip, a stabilized currency, declining unemployment, growing real wages, improving infrastructure, and booming IT, agriculture, and alternative energy sectors. A small but dynamic middle class has emerged and is playing an active role in Ukrainian civil society. Villages, towns, and regions are finding new life thanks to the decentralization of power and increases in local budgets. Ukrainian culture, whether film, books, music, or theater, is thriving in a way it hasn’t since the 1920s. Ukraine is finally capable of defending itself against anything but massive full-scale Russian aggression, thanks in no small measure to military aid provided by the U.S. Congress.
So, when you hear Trump and others cite Ukraine as a cesspool of corruption, keep in mind the major progress Ukraine is making in fighting it. When journalists report on the machinations of shadowy Ukrainian oligarchs, remember Ukraine’s legions of plucky entrepreneurs and innovators. Remember, too, the nearly 100 courageous civic activists who died in 2014 fighting for democracy and European integration, and keep in mind the thousands of Ukrainians who have died heroically fighting Russian military aggression.
Despite Trump’s effort to paint Ukraine as a corrupt failed state, it is anything but. His “fake news” is, rather, an artifact of the company he keeps. Indeed, contrary to the president’s unfounded assertions and Putin’s preposterous hopes, Ukraine is well positioned to take off and become a stable European democracy in the coming years.
Adrian Karatnycky is a senior fellow at the Atlantic Council and founder of Myrmidon Group.