Ukraine Labor Dares Operation Vulture
By Michael Hudson
Ukraine’s collapse since the February 2014 coup has become an umbrella for
grabitization. Collateral damage in this free-for-all has been labor. Many
workers are simply not getting paid, and what they actually is being paid is
often illegally low. Employers are taking whatever money is in their business
accounts and squirreling it away – preferably abroad, or at least in foreign
currency.
Wage arrears are getting worse, because as Ukraine approaches the eve of
defaulting on its €10+ billion London debt, kleptocrats and business owners are
jumping ship. They see that foreign lending has dried up and the exchange rate
will plunge further. The Rada’s announcement last week that it shifted €8
billion from debt service to spend on a new military attack on the country’s
eastern export region was the last straw for foreign creditors and even for the
IMF. Its loans helped support the hryvnia’s exchange rate long enough for
bankers, businessmen and others to take whatever money they have and as many
euros or dollars as they can before the imminent collapse in June or July.
In this pre-bankruptcy situation, emptying out the store means not paying
workers or other bills. Wage arrears are reported to have reached 2 billion
hryvnia, owed to over half a million workers. This has led the Federation of
Trade Unions of Ukraine to picket against the Cabinet of Ministers on Wednesday
(May 27). More demonstrations are scheduled for the next two Wednesdays, June 3
and 10. According to union federation Deputy Head Serhiy Kondratiuk, “the
current subsistence wage of UAH 1,218 is 60% less than the level set in
Ukrainian law, which is confirmed by the calculations if the Social Policy
Ministry. … the subsistence wage in the country should exceed UAH 3,500 a month,
but the government refuses to hold social dialog to revise standards.” [1]
The scenario that is threatened
Emptying out Ukrainian business bank accounts will leave empty shells. With
Ukraine’s economy broken, the only buyers with serious money are European and
American. Selling to foreigners is thus the only way for managers and owners to
get a meaningful return – paid in foreign currency safely in offshore accounts,
outside of future Ukrainian clawback fines. Privatization and capital flight go
together.
So does short-changing labor. The new buyers will reorganize the assets they
buy, declare the old firms bankrupt and erase their wage arrears, along with any
other bills that are owed. The restructured companies will claim that bankruptcy
has wiped out whatever the former firms (or public enterprises) owed to workers.
It is much like what corporate raiders do in the United States to wipe out
pension obligations and other debts. They will claim to have to “saved”
Ukrainian economy and “made it competitive.”
Operation Vulture
The Pinochet coup in Chile was a dress rehearsal for all this. The U.S.-backed
military junta targeted labor leaders, journalists, and potential political
leaders, as well as university professors (closing every economics department in
Chile except for the Chicago “free market”-based Catholic University). You
cannot have a “free market” Chicago-style, after all, without taking such
totalitarian steps.
U.S. strategists like to name such ploys after predatory birds: Operation
Phoenix in Vietnam, and Operation Condor in Latin America that targeted
“lefties,” intellectuals and others. A similar program is underway against
Ukraine’s Russian speakers. I don’t know the code word being used, so let’s call
it Operation Vulture.
For labor leaders, the problem is not only to collect back wages, but to survive
with a future living wage. If they refrain from protesting, they simply won’t
get paid. This is why they are organizing a growing neo-Maidan protest
explicitly on behalf of wage earners – so that the junta’s Right Sector snipers
cannot accuse the demonstrators of being pro-Russian. The unions have protected
themselves by seeking support from the UN’s International Labour Organization (ILO),
and from the International Trade Union Confederation in Brussels.
The most effective tactic to tackle the corruption that is permitting the
non-payment of wages and pensions is to focus on the present regime’s foreign
support, especially from the IMF and EU. Using labor’s grievances as an umbrella
to demand related reforms could include warnings that any sale of Ukrainian
land, raw materials, public utilities or other assets to foreign buyers can be
reversed by future, less corrupt governments.
In labor’s favor is the fact that the IMF has violating its Articles of
Agreement by lending for military purposes. As soon as its last loan was
disbursed, Poroshenko announced that he was stepping up his war against the
East. This brings the IMF loan close to being what legal theorists call an
Odious Debt: debts to a junta taking power and looting the government’s Treasury
and other assets in the public domain, leaving future governments to pay off
what has been stolen.
Labor’s fight for a living wage is not only for retroactive shortfalls, but to
put in place a recovery plan to protect against the economy being treated like
Greece or Latvia, neoliberal style. U.S. strategists have been discussing
whether they could dismiss the $3 billion that Ukraine owes Russia this December
as an “odious debt”; or, perhaps, classify it as “foreign aid” and hence not
collectible in practice. Ironic as it may seem, the Peterson Institute of
International Economics, George Soros and other Cold Warriors have provided
future Ukrainian governments with a repertory of legal reasons to reconstitute
their economy foreign-debt free – leaving the government able to pay wage and
pension arrears.
The alternative is for international creditors to win the case for putting
foreign bondholders, the IMF and European Union first, and sovereign rights to
prevent self-destruction second.
Michael Hudson is
President of The Institute for the Study of Long-Term Economic Trends (ISLET), a
Wall Street Financial Analyst, Distinguished Research Professor of Economics at
the University of Missouri, Kansas City and author of
The
Bubble and Beyond (2012), Super-Imperialism: The Economic Strategy of
American Empire (1968 & 2003), Trade, Development and Foreign Debt (1992 & 2009)
and of The Myth of Aid (1971).
Michael acts as an economic advisor to governments
worldwide including Iceland, Latvia and China on finance and tax law.
Footnotes
“Trade unions to picket government weekly from May 27, 2015,”
Interfax.[1]
