Governance of economic transitions: a case study of Ukraine

Abstract

PurposeUkraine has had to change in ten years from a strong centrally controlled communist economy to a market economy. It has not been successful. The purpose of this paper is to explain this failure from the complexity management point of view.Design/methodology/approachThis paper takes a cybernetic view of the attempts at Governance in Ukraine over its transition period. To diagnose the problem a novel approach based on the Viable Systems Methodology of Stafford Beer is used.FindingsSerious structural flaws are identified in the organisation of governance at the national level and it is shown how these inadequacies induced the formation of mutant abnormal strategies at the level of economic agents.Practical implicationsPresents credible explanations of phenomena such as barter, corruption, growth of overdue debts and the existence of incentives (other than profit maximizing ones) which drive the behaviour of firms.Originality/valueThere are many explanations of the same phenomena in contemporary economic literature but our explanations are based purely on an analysis of the complexity management tasks performed at each level of recursion: from a government to a firm. Moreover, the paper shows that the structural specificity of a system shapes the behavioural patterns of each systemic element, would it be a government body or a firm's management. Therefore, the notion of structural determinism allows one to state that structure defines the dynamics of any systemic change.