Economic Sovereignty and How to Get It under Current Development of Society and Regulatory System

Journal of Environmental Treatment Techniques

2019, Special Issue on Environment, Management and Economy, Pages: 898-903

J. Environ. Treat. Tech.

ISSN: 2309-1185

Journal web link: http://www.jett.dormaj.com

Economic Sovereignty and How to Get It under

Current Development of Society and Regulatory

System

Olena M. Moiseienko *, Oleh L. Yaremenko

¹Department of Economics and Management, University of Modern Knowledge, Kyiv, Ukraine

Department of Institutional Economics, National Academy of Sciences of Ukraine, Kyiv, Ukraine

Received: 13/09/2019

Accepted: 22/11/2019

Published: 20/12/2019

Abstract

The article is devoted to urgent problems of economic sovereignty in current conditions of development of society and the

regulatory system. The author analyzes the concept of "economic sovereignty", determines that this term can be defined as the

potential ability of the state’s economic system to ensure sustainable reproduction of the national economy as a social and economic

integrity at the expense of available internal resources. The main component of economic sovereignty is specified as economic

freedom, showing the ability of the economy reproduction, considered to be a crucial factor in achieving economic sovereignty.

Some propositions how to gain economic sovereignty through a synthesis of state regulation and civil society resources using

Ukraine as a case are contained herein. The research proves impossibility of economic sovereignty based on the "oligarchic model"

of economic development.

Keywords: Economy, Sovereignty, Freedom, State, Society, Regulation, Resources, Stability, Oligarchs, Model

downturn, the state’s regulatory ability to maintain

Introduction

macroeconomic stability on effective counteraction against

destructive exogenous influences, to ensure national interests

in economic sovereignty seems to be urgent.

At the beginning of the 21 century, complicated

processes in the global political and economic space

significantly changed priorities, tasks and regulatory ability

of subjects of the world economy, first of all, because of

impact of a political component in economic development on

international commercial and financial relations by principal

political and economic actors (1, 13). Thus global

imbalances, directly affecting economic development of

many developing countries, deepen economic gaps between

developing and highly advanced economies, pushing many

poor countries on the fringes of the world economic system

an appendage of largest economies.

In turn, internal problems in these countries, such as

concentration of resources in the hands of political and

economic elites, poor regulatory framework developing

common rules, willingness to sell national resources for

short-term interests, reduce economic sovereignty (19). These

processes weaken the state’s ability to adequately influence

the economic development and allocation of national

resources as a regulator and economic agent. In this regard,

under increased global and national imbalances and

The concept of "economic sovereignty of states" is

closely connected with conditions for the general task to

create a fair economic order. According to the approach

specified in various economic concepts, the idea of economic

sovereignty means a synonym for economic independence.

This simplified interpretation of sovereignty is refuted by

historical and economic processes in the 20 century, when

colonial countries gained state sovereignty but not economic

sovereignty, these countries failed to organize their

economics so that not to use external resources, various

financial and economic and humanitarian assistance in order

to maintain economic stability. However, EU countries which

have voluntarily lost certain economic sovereignty, having

transferred economic management functions to the

supranational authorities, are certainly considered to be

sovereign economies. At the same time, the economic

sovereignty issue is relevant not only for developed countries

but for developing countries as well.

.1 The Purpose of the Article

Accordingly, this article aims to analyze possibilities of

Corresponding author: Olena M. Moiseienko, Department

of Economics and Management, University of Modern

Knowledge, Kyiv, Ukraine. E-mail: lexelit77@gmail.com.

achieving economic sovereignty in modern conditions of

Journal of Environmental Treatment Techniques

2019, Special Issue on Environment, Management and Economy, Pages: 898-903

development of national regulatory systems and civil society

institutions.

In this regard, we understand that "sovereignty" means an

entity’s ability to independently ensure its existence in the

current economic conditions. Moreover, the concept

investigated is increasingly shifting from geo-economic

interpretation to the national economy (6, 9, 17).

Materials and Methods

To explore the material, we used a systematic approach to

This understanding allows to define economic

sovereignty as the possibility of extended reproduction of the

national economic system and the progress of productive

forces for benefits of mankind, modern adaptation to possible

unfavorable internal and external conditions, especially to

globalization (11, 15).

For our part, we can say that from the perspective of

modern institutional theory, "economic sovereignty" can be

defined as the potential ability of the state’s economic system

to ensure the sustainable reproduction of the national

economy as social and economic integrity at the expense of

available internal resources.

scientific cognition at the stage of academic substantiation of

issues related to possibilities of achieving economic

sovereignty; special methods – statistical for processing the

data required to formulate the research results; classification

–

in determination of the main ways to achieve economic

sovereignty; simulation – in discussion of the results to

confirm previous theoretical summarizing; generalization

methods – in formulation of the conclusions hereof. The

research is based on modern monographs, articles,

publications of foreign and domestic authors, state statistics.

The studied information from foreign and domestic sources is

summarized and presented conveniently for understanding

and substantiating ways to achieve economic sovereignty in

the current conditions of development of the state, society

and economic system.

Speaking about the ability of the economy to

sustainability, researches by L.O. Kelso and P.H. Kelso

(

1986) should be mentioned, they found that an economy

based on private property and free market is believed to be a

self-regulatory mechanism in reasonable equal economic

opportunities. Although instability of the economic system is

its natural state, and the way out is possible either through

self-regulation and adaptation of the economy to new

conditions, or through self-organization, transformation of the

economy structure and rules and priorities of social

Scientific novelty of this article is in proof using Ukraine

as a case that an oligarchic model of economic development

is unable for economic sovereignty; considerations on

possibilities of achieving economic sovereignty based on a

synthesis of state regulation and civil society resources are

stipulated herein.

(

institutional) development (7).

Results

It should be noted that the economic system self-

The national sovereignty issue is believed to be one of the

regulation is viewed through the prism of economic freedom,

which is defined as no government interference in the

economy, except protection of citizens and the public order

from negative externalities, and ensuring private property

rights (4).

The economic freedom is based on private property. On

this subject, F.A. Hayek (1945) noted that the private

property system is the most important guarantee of freedom,

not only for those who own property, but scarcely less for

those who do not. Just because resources are controlled by

many unrelated owners, nobody may have absolute power,

and people may decide and act independently (3),

contributing to economic actors’ sovereignty.

central topics in many sciences (political science, law,

geopolitics), it was long considered through the lens of law

and interpreted from ability of the state as an institution to

influence economic, political and social processes in the

country. In this sense, sovereignty was perceived as the state

independence from other states’ influence on its internal

affairs and foreign policy.

Currently integration of countries into the global

economic system casts a long shadow on achievable

economic sovereignty. Even such countries as the United

States and China find a strong mutual dependence in the

financial and economic sphere, leading to permanent "trade

wars."

Table 1: Distribution of the population by average per capita equivalent total income in 2014-2018 (16)

Distribution of the population by average per capita

equivalent total income per month (UAH, 1 US dollar =

2014

2015

2016

2017

2018

5.0 UAH)

up to 480.0

0.7

8.0

26.0

27.0

16.4

21.9

…

0.2

5.0

18.7

26.7

20.0

29.4

…

0.3

3.1

0.1

2.3

0.1

2.0

80.1-840.0

40.1-1200.0

12.9

23.9

21.1

14.4

9.4

9.1

7.1

200.1-1560.0

560.1-1920.0

920.1-2280.0

280.1-2640.0

640.1-3000.0

000.1-3360.0

360.1-3720.0

21.3

22.1

16.6

10.4

6.7

20. 9

23.1

14.4

11.2

6.3

…

5.6

…

3.0

4.3

5. 2

5.0

…

2.2

2.0

more than 3720.0

…

4.1

5.1

4.7

Journal of Environmental Treatment Techniques

2019, Special Issue on Environment, Management and Economy, Pages: 898-903

Table 2: Rating and net worth of the richest Ukrainians (12)

Name

Business

Estimated net

worth in 2017

Estimated net

worth in 2016

($ mln)

2300

Change in net

worth

(

$ mln)

2200

1200

1100

871

Rinat Akhmetov

Igor Kolomoiskiy

Gennady Bogolyubov

Victor Pinchuk

Andrey Verevsky

Yuri Kosyuk

Alexander Yaroslavskiy

Konstantin Zhevago

Dmitry Firtash

Petro Poroshenko

Vadim Novinsky

Leonid Chernovetskiy

Sergey Tigipko

metallurgy, fuel and energy complex

finance, metallurgy, fuel and energy complex

metallurgy

▼

▲

▼

▲

▼

▲

▼

▲

1300

1200

694

1000

721

431

251

858

444

680

495

agribusiness

investment, real estate

metallurgy

chemistry, media

738

734

635

623

589

550

530

523

food industry, media, agribusiness

metallurgy, shipbuilding, oil and gas sector

investments

finance, engineering, pharmaceuticals

diamond mining, e-commerce, food processing,

metallurgy

Vitaliiy Gaiduk

502

263

858

173

▲

▼

▬

Leonid Yurushev

Alexander and Galina

Geregi

hospitality industry, mechanical engineering

retail, agribusiness

Konstantin Grigorishin

Alexey Vadaturskiy

Vladymir Kostelman

Valeriy Khoroshkovskiy

Vitaliy Antonov

power engineering, mechanical engineering

agribusiness

450

442

381

356

858

840

152

137

▼

▲

retail, finance, restaurants

media

oil products trade

128

▬

▲

Nikolay Zlochevskiy

Igor and Grigoriy Surkis

Pavel Fuks

oil and gas sector

power industry, banking sector, football,

metallurgy, media

real estate, oil and gas business

new

121

new

Nikolay Yankovskiy

pharmaceuticals, chemical industry

240

▼

Looking at the situation in Ukraine through these theses,

meet the oligarchy’ needs and ensure an adequate standard of

living for the population. Only such an "imperial" format

allows to relieve internal contradictions between the

oligarchy and the population, and among the main economic

agents. However, this system loses stability with resource

depletion, impossible redistribution through the country's

budget, since most of these resources at the oligarchs’

disposal are immediately sent abroad forming a counter-flow

of resources and taking them out of economics.

we see the household resources fail to compete with volumes

owned by domestic business and political elites. Statistical

data show that the majority population in Ukraine lives

actually on the verge of starvation (Table 1). Thus, incomes

of the majority population in Ukraine are within 100-150 US

dollars per month, with their significant differentiation, given

that the Ukrainian oligarchs’ net worth remains high (Table

2).

Significant income differentiation in Ukraine causes

Ukraine never aspired to imperial status, therefore, this

economic model could function relatively successfully at the

stage of initial capital accumulation, when national wealth

was redistributed, and the main resources came from Russia

to develop an oligarchic type economy as "payment for

loyalty". Since Ukraine gained political sovereignty, the field

of economic sovereignty got narrowed, so the neighboring

empire regulated the supplies under "whoever pays, makes

the rules" principle. This approach was resisted both by the

population and the economic and political elites, and this

resulted in nearly lost economic sovereignty when the

"northern neighbor" limited resource supplies.

Also, the oligarchic model required appropriate

legislative support, so the legislative power just turned into

an appendage to the existing economic mechanism, in these

conditions the economic freedom was deliberately limited by

legislative acts aimed solely at ensuring the ruling economic

and political elite’s interests, aspiring to increase in assets

crises, and the way out often shapes destructive,

revolutionary forms. Comparison of the data above allows to

say that resources are illegitimately distributed in Ukraine,

the largest financial groups and their owners increased their

financial power, even under the economic crisis and war,

while most people live in poverty, which is ascertained by

Ukrainian authors in papers on issues of the state economic

security (2, 10).

Thus, the above data and researches of domestic

economists show modern Ukraine as a typical "oligarchic

state" that misuses the power to maximize income of certain

business groups, corporations, assuming their intervention in

the state affairs, in various spheres of public and political life.

As for achieving economic sovereignty, an oligarchic state is

stable only if exists as a global empire (what Russia is

striving for), capable to ensure a constant flow of resources

into the oligarchic economy. These resources are sufficient to

Journal of Environmental Treatment Techniques

2019, Special Issue on Environment, Management and Economy, Pages: 898-903

under their significant decrease. This thesis can be supported

by statistical data showing a high level of corporate raids (up

to 700 per year) under the lee of government representatives

and the function of contribution to personal qualities

disclosure.

The researchers emphasize that such functions of civil

society as 1) representing citizens’ interests; 2) their

involvement in social processes; and 3) provision of social

services, give reason to interpret it as an independent system,

not as a secondary social player, since this institution

performs important stabilizing economic functions ignored by

the state and business (18).

In this regard, the problem of freedom in economic

activity, achievement of economic sovereignty cannot be

considered only as efforts of the authorities. Currently civil

society control is considered to be effective and efficient

influence upon economic power representatives, which in the

modern economy becomes one of the economic relations

subjects, able to create necessary conditions for the real

economic sovereignty and economic freedom.

(

8) with lower rated economic freedom - 147 place in the

2019 world ranking (5).

In such economic system, the owner needs own assets to

be secured by authority in order to make profit, or to

participate in the oligarchic mechanism, to pay for the

authorities’ services to run business. Without access to

power, it is impossible to preserve economic assets, to earn

income, and even to keep business.

Under these conditions, the question arises, how to

change this economic model, how to achieve economic

sovereignty, to obtain an acceptable degree of economic

freedom?

For sure, creation of competitive economy seems to be

main prerequisites for economic sovereignty development as

well as the reasonable participation of authorities in the

economic system management. The practical implementation

of sovereignty should focus on ensuring the system stability,

self-regulation ability, which, however, does not exclude the

state regulatory impact. Moreover, in Ukraine, the problem of

The civil society is reasonably considered as the center of

economic power since economic sovereignty is recognized

through awareness of the individual’s sovereignty (freedom),

inalienable rights in social and economic relations, and the

idea of civil society helps preserve the inexhaustible potential

of economic freedom.

"government regulation of behavior" arises, considering its

current destructive nature.

Civil society is believed to combine formal and informal

nonprofit organizations and rules (institutions) connecting an

individual or household with the state (government) and

business (private sector).

In our opinion, the logic of the power of civil society can

be outlined as follows: various functions undertaken by civil

society as nonprofit organizations are accompanied by an

impact on economic agents’ behavior, including conditions

and process of formation of economic sovereignty and

economic freedom.

As for solving this problem, it should be noted that

society can influence the state power only in two ways –

revolutionary, when this society forces the power violently to

share its own resources and by influencing the state power

with the civil society resources.

In this regard, the researches by L. Salamon, L. Hems and

K. Chinnock (2016), aimed at revealing the effectiveness of

nonprofit organizations in performance of functions of civil

society, should be mentioned.

They distinguish several roles of the nonprofit sector:

The current state of civil societies in economically

developed countries fully confirms this concept. Indeed, in

developed countries, civil society permeates all areas of

people’s and economic life, which determines high economic

sovereignty and freedom, not excluding the use of

instruments of economic pressure on the behavior of

destructive economic entities.



services provision - in this role, the nonprofit

sector can provide increased quality of services traditionally

provided by the state, reduce costs for services, and render

better services;



innovations implemented due to flexibility of

nonprofit organizations, their ability to carry out

technological and product innovations, to act under new

social technologies;

4 Discussion



initiation and distribution of social changes to be

The experience of the 2014 Ukrainian Revolution of

Dignity convincingly showed that the revolutionary

achievement of economic freedom, an essential condition for

economic sovereignty, led to negative consequences.

Subsequent events showed that the society represented by

small and medium-sized businesses never got free access to

resources, considering that the revolution was led by the

oligarchy representatives to gain new power authorities and

resources redistribution using the revolutionary-minded

masses. Note that the redistributed resources are depleted,

since their traditional supplier does not see the point in

supporting a new political regime that seeks to gain full

political and economic sovereignty.

executed by civil society institutions, connecting individuals

with the political process on behalf of their interests, standing

for rights, etc.;



contribution to disclosure of personality traits and

leadership development; voluntarily participation in various

nonprofit organizations, revealing an individual’s best

qualities;



formation of social capital and contribution to

society democratization; voluntary participation in nonprofit

organizations strengthening trust relationships by an

integrative role in society (14).

Using expert assessments of the success of these

functions in 40 countries, the authors (14) discovered that

most effective function is service provision, followed by the

innovative function, followed by the function of initiating

changes, followed by the function of social capital formation,

As a result, we have a social and economic decline,

accompanied by political crisis, which leads to stability loss,

catastrophic decrease in economic sovereignty.

However, the possibilities of civil society in this situation

seem to be more effective. This thesis can be supported by

Journal of Environmental Treatment Techniques

2019, Special Issue on Environment, Management and Economy, Pages: 898-903

the following reasoning: the economic system stability (Pes

)

Conclusions

with two interacting agents - "civil society" and "destructive

economic entities" expressed by the equation (compiled by

the author):

In general terms, the above allows to reconsider the

question of the power distribution in the economy.Currently,

to ensure economic sovereignty and economic freedom, the

state and civil society should systematically redistribute

limited resources, set equal conditions for business and

market behavior using legal coercion and society resources

thus regulating the level of economic sovereignty. Treating

civil society as a participant in power relations in the

economy, it can be stated that the practical principles of the

functioning of the civil society institution as an economic

power subject lie in overcoming the monopoly of the state

and business in the economy, shifting emphasis on

consumers’ power and self-regulation when civil society

institutions serving for overcoming market imperfections

contribute to economic freedom development and economic

sovereignty strengthening. Expanded opportunities for

participation of wider population in economic life are

believed to be a worldwide phenomenon, and civil society is

a universal tool for such participation because of inherent

characteristics independent of the specifics of the state’s

institutional structure. Firstly, it is a type of social actions at

the junction of the economy, state and private life in unions,

associations, social movements, characterized by high self-

organization. Secondly, actions of civil society are focused on

the achievement of the common good, regardless of

understanding by persons acting on behalf of the state and

business. Finally, the functioning of legal norms that

determine the necessary degree of economic freedom and

economic sovereignty.

еs = G

- G

- efforts to strengthen the economic regime, to

develop economic freedom and economic sovereignty at the

expense of civil society resources;

G - efforts of economic entities opposing society and

striving to solve economic problems beyond the accepted

regulation, with significant economic resources, making it

possible to maintain a high level of confrontation and their

own influence on economic processes (U

);

= G – the stable economic system, when efforts of

civil society compensate for the negative impact of

destructive economic entities;

0 е

G > G – the ideal economic system, when efforts of

civil society on achieving economic freedom and economic

sovereignty exceed the negative impact of destructive

economic entities;

0 e

G <G – the unstable economic system, when efforts of

civil society on achieving economic freedom and economic

sovereignty fail to resist the negative impact of destructive

economic entities. Let’s add another factor into equation 1,

namely, G – efforts of the state aimed at developing the

economic system self-organization to ensure the economy

sovereignty and development. Note that this value means the

positive impact of the state on economic processes, but in the

oligarchic model" we get the opposite result. Then, the

stability of the economic system when the state acts as a

positive regulator", taking into account the new factor (Pes1),

can be described as follows:

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