|Type of paper:||Term paper|
|Categories:||Marketing Economics Agriculture|
Gone are those days when Ukraine used to assume the position of the Soviet's breadbasket. The reason behind that was the remarkable agricultural growth of Ukraine. Its excellent and fertile soil, largest sunflower production, pure maize crops, grain, and remarkable dairy products strengthened its economy and made it a very valuable state for the Soviet Union (Zhukova, 2019). The Ukraine economic crisis of 2008 snatched its status of the breadbasket and left the vacant bucket with a staggering economy and stumbling society. A lot of factors contributed to the crisis. The global financial crisis proved to be the initiator of the problems while the political turmoil, economic unrest, internal instability, processions, and wars added fuel to the fire and further wobbled its economy.
However, the European Union is taking significant steps to take Ukraine out of this drastic and alarming situation. In this pretext, Ukraine's policies are also framed by the choices of the European Union. IMF has also released relief packages for Ukraine which are conditional to the implementation of the economic reforms policies as proposed by the IMF. Ukraine is in dire need of implementing the consistent, long term and sustained policies to take its economy to a boom. Moreover, the eradication of the political unrest is the need of the hour because, without a stable political system, one cannot dream of a stable economic structure in the country.
Brief History: Soviet Breadbasket, and Post-Soviet Era
Ukraine enjoyed the status of the Breadbasket for the rest of the Soviet. This was because of the remarkable agricultural output of Ukraine. It is indeed a marvelous and significant fact that the agricultural products in Ukraine enjoyed their boom till 1940. It was at that time different crops like maize, sugar, sunflower seeds, potatoes, and other vegetables strengthened the stumbling economy of USSR.
Although the post-war period in the aftermaths of 1917, the conditions were not favorable in Ukraine in terms of the exploitation of the labor and the babbling economy because of war, the agricultural growth was not affected. Ukraine used to serve the purpose of the breadbasket for the Soviet Union with the provision of remarkable maize, vegetable and sunflower seeds (Zhukova, 2019). Apart from these crops, the production of the dairy products like milk, meat, and eggs also increased with the enhanced trend of the private plots where people gathered the dairy products.
However, the crops were reported less in 1945 as compared to their ratio till 1940. The five years economic plans of 1950 and 1955 could not prove to be productive in giving a significant increase in the agricultural output. The economists took a lot of steps to overcome this issue (Marples, 2017). The principle of collectivism was in practice, and more than half of the agricultural land was under the possession of the state. Although the post-1940 era saw a significant increase in the area of the cultivable land, still the agricultural output did not meet the desired quantity.
Several factors are responsible for this decrease in production. First and the foremost reason is the state's extra attention to the industrial sector. Economists, planners, and investment were served to enhance the industrial growth which led to the insufficient attention to the agricultural sector. Another undeniable factor was the drastic change in the weather that destroyed the crops and the unfavorable conditions which decreased the crop production.
The agricultural policies of Stalin proved to be a failure in terms of the agricultural output as those policies could not uplift the agricultural sector. The people faced severe famine situation in the 1960s which was a direct outcome of the less agricultural outcome. After Stalin, Khrushchev's policies of increasing the agricultural sector also proved fruitless as these policies led to severe famines (Marples, 2017).
There were two types of farms at that time in Ukraine. Sovkhozy or the farms which were under the direct control of the state and kolkhozy or the farms which were in collective possessions of the peasants were the two types. The agricultural output of both these farms differed from each other (Deininger, 2017). The state-owned farms yielded more and better crops as compared to the collective farms. This was because the state had provided an adequate and sufficient amount of facilities to the farmers. Moreover, the wages given to the farmers in state-owned farms were significantly luxurious and better as compared to the ones received by the peasants in the collective farms.
Current Political Situation /Economic Turmoil Since 2014
The November in 2013 came with the massive political unrest for Ukraine. President Yanukovych's regime started to view a challenging situation as a result of massive protests. The decision to forego the agreement with the European Union triggered this mass unrest. The movement which started with an aim for Euromaidan expanded and finally came to an end after meeting its target to depose the president Viktor Yanukovych in 2014 (Deininger, 2017).
The year 2014 started with a large number of people gathering on the streets in different western cities of Ukraine. An estimated number of 2000 people gathered around the regional capital and surrounded the state buildings (Giuliano, 2018). The conditions became worse, and the protestors strongly demanded the resignation of the president.
The internal unrest in Ukraine gave an open field to Russia which attacked Crimea and sent its soldiers there. The people and the Ukrainian forces were unable to identify these soldiers which they thought were the Ukrainian forces. It was later realized that they were Russian soldiers when they took over the control of the building of the parliament in Crimea. Russia issued a statement claiming to have controlled over Crimea and also announced a referendum that would decide the independence of Crimea from Ukraine. The said referendum was held as a result of which Russia claimed to legalize its control over Crimea.
In the wake of these circumstances, the supporters of Russian rule in Ukraine and the opponents of the Ukrainian government kept on protesting. Their protests soon acquired military strength, and armed resistance was started in different parts of Ukraine. To curb this resistance, the Ukraine military launched its strikes. The Russian forces violated the Ukrainian borders in August 2014 and entered in the Ukrainian territory (Giuliano, 2018). This was a direct attack that Russia launched in Ukraine. The war led to a ceasefire agreement in September 2014 which was finally put into action in February 2015. After this, the presidential elections were held in Ukraine, and Petro Poroshenko was elected as the President of Ukraine.
The study of economic condition of Ukraine during the 21st century can be divided into different phases to date. During the first phase that starts from the year 2000 to 2008, Ukraine's economy witnessed a remarkable increase. This boom owed much to the industrial boom and the reported 50%-55% rise in Ukraine's exports (Raik, 2017). Ukraine's industries namely chemical, metal and engineering flourished a lot due to the increase in the global prices of these products. As a result of the currency making by the central banks, the economy witnessed a significant influx of cash which led to increased foreign cash in the Ukrainian market. These circumstances reduced the poverty rate of 35% in 2000 to 9% in 2007 (Raik, 2017).
However, some of these financial steps proved counter-productive. The significant growth in the Ukrainian credit created the economic bubble which had dire effects on its economy. The inflation increased, and this resulted in drastic changes in the export quality of the Ukrainian products. This led to a decrease in the export rate which otherwise was much higher. The Great Recession of 2008 also gave a death blow to the economy of Ukraine. The global financial crisis created a devaluation of Ukrainian Hryvnia gradually fell in its value from 2008 to 2009 (Petro, 2019). Eventually, the unemployment rate increased to 7.8% in 2008 and 10% in 2009. A lot of people became jobless, and the Ukrainians witnessed a stumbled economy baffled through the economic crisis of 2008. This drowning situation resulted in a severe decrease in Ukrainian's GDP from 16%-19% in 2009 (Petro, 2019). Finally, the situation became favorable to some extent in 2010, and somehow the Ukrainian economy recovered from a severe loss.
Russian limitations and strict trade policies affected the staggering Ukrainian economy in 2013. Russia, which shared the largest portion of 25% in Ukraine's trade in 2013, became overcome by other countries in this share because of its gas disputes with Ukraine (Graaf, 2017). However, Ukraine exported its 37% products to the Common Wealth of the Independent States and 28% to the European Union countries. The industrial sector supported Ukraine's economy with a 26% share in its GDP by 2012.
The political turmoil that has been discussed above cast a direct effect on the economy of Ukraine. The largest trade partner Russia withdrew after the Crimea issue which led to a flaw in the Ukrainian export sector which declined by 31% in 2015 (Petro, 2019). The economy of Ukraine saw a damaging decrease of 10% by the start of 2015 which was further decreased by 13% in 2016. International Monetary Fund (IMF) had announced a relief package of 17 billion dollars for Ukraine for 2015 and 2016, but the two installments of this package were given because of the lack of the implementation of the IMF proposed economic reforms. The outburst of war in the two important eastern provinces of Ukraine namely Donetsk and Luhansk led to a total of 48% decrease in the export (Petro, 2019). This is because these two regions were the main contributors to the production of export quality products.
Agriculture as a comparative advantage
Despite all the turmoil and turbulence faced by Ukraine, its agriculture sector never fails to come up to its expectations. Even in the current situation, the agriculture sector of Ukraine is contributing much to strengthen its economy. Ukraine's agriculture sector is widely important because it possesses 48 million hectares of arable land which constitutes more than half of Ukraine's total land area. Agriculture holds the prominent share of Ukrainian exports. A survey shows that in 2018, agriculture shared around 45% of the total profit generated from export (Clap & Oane, 2016).
Sunflower is the largest agricultural crop in Ukraine. It constitutes about 30% of the total profitability in Ukraine's economy. The reasons behind this are the affordable cost of their products and an ever increasing demand. Ukraine emerged as the largest sunflower producer by contributing to the 30.5% global production of the Sunflower. However, in the current session of 2019, the Sunflower production has decreased a bit than the previous ones because of the reduced crushing of the seeds (Clap & Oane, 2016).
The presence of the world's second-largest shares of black soil adds advantage to the Ukrainian's agriculture sector. This makes Ukraine blessed with the highly productive farmland which leads to the favorable crops that strengthen Ukraine's economy. Ukraine produces around 20 million tons of wheat per annum (Raybchenko &, 2016). Barley, corn, and sugar beets are also among the leading agricultural products of Ukraine. All these products collectively constitute the ever-growing agricultural sector of Ukraine and make its economy stable.
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