Maverick Traveler

Location Independence, Geo Arbitrage, Individual Freedom

Ukraine Is On The Verge Of Total Collapse

As I write this from a typical “Stolovaya” in downtown Kiev, Ukraine, I realize that I’ve developed an addiction to this country. Out of the 85 or so countries that I’ve stepped foot in my life, Ukraine is the only country that I have returned to no less than five times in the past five years. Of course, this isn’t just any country: I was born here. And in 1989, while the Soviet Union was breaking up into 15 different countries, I left my homeland and immigrated to America.

I first returned to Ukraine in the summer of 2011. After spending many years living in America and Latin America, returning to this part of the world was a truly surreal experience. Suddenly, everyone around me was speaking my native language, and I no longer needed to master a new foreign language like countless times before. Language is the gateway to culture, so it’s extremely rewarding to connect with the people in ways that you cannot if you don’t speak the local language.

Although I viewed Ukraine as a developing country, I never considered it to be poor. The word “poor” has always been reserved for places in Africa or Central Asia. Perhaps it’s also a result of living in the “developing” countries in Latin America. Countries like Colombia, Argentina and Brazil aren’t exactly as rich as America or Australia, but they’re very comfortable places to live.

Sure, you may not have some of the nicer amenities that Western countries take for granted like two-day Amazon shipping or on-demand food for your pet, but you’re still blessed with the standard stuff you need to survive: functioning infrastructure, good public roads, reliable public transport, running water (potable in Medellin), gas and electricity.

Still, putting a country like Ukraine in the same league as other “developing” countries like Colombia and Brazil isn’t correct either. The latter just feel richer than the former. In fact, when I lived in US, I knew many Colombian and Brazilian immigrants who repatriated to their respective homelands, but I’ve yet to meet anyone in America or another highly developed country who voluntarily returned to Ukraine or Russia. (Someone like me who’s making dollars and then spending them in the cheap local currency doesn’t count).

When Ukraine was part of the mighty USSR, it was considered “the breadbasket of Soviet Union” because of the sheer amount of wheat it produced. (Yes, the bread is really good here.) But that’s where its fortunes end. Unlike Russia, which is blessed with massive amount of important natural resources (e.g., gas and oil), Ukraine’s only advantage is geographical: it mainly serves as a buffer between its mighty eastern neighbor and Europe.

Another reason I didn’t realize that Ukraine is so poor is because I was mostly a fly-by-tourist, a foreigner—not a local. I arrived, rented a nice (and usually overpriced) apartment smack in the center, took taxis around town to coffee shops and ate at nice restaurants. I almost never viewed things from a local’s perspective.

On the other hand, if you have the misfortune of being a local, things are tough. Ukraine is poor. Really poor. The country hasn’t been stable for the past decade, but things really accelerated after the Maidan revolution in 2014. Not long after the—as some would call undemocratic and unconstitutional—change of power, several crucial things occurred: annexation of Crimea by Russia, a war in the eastern part of the country, and a devaluation of the currency, hryvnia, from a fixed 8 units to the dollar to around 29 (as of this writing).

Economics

Let’s talk economics. As someone who’s making dollars, I’ve found the capital, Kiev, to be one of the cheapest cities I’ve ever been to. I used to think that Latin America was pretty cheap. And, indeed, coming from overpriced places like San Francisco (where I lived for ten years) and New York City (where I also lived for ten years), Latin American cities are very cheap. But Ukraine is on a completely different level of cheapness altogether.

In the capital, Kiev, an Uber taxi ride is about half the price of a NYC subway ride. I can have a packed three-course lunch for the same price as a small sandwich in a Brooklyn bakery. A decent one-bedroom apartment costs a bit more than monthly Brazilian Jiu Jitsu membership in a good Manhattan school (hint: it’s about ten times less expensive than a comparable apartment in San Francisco).

That means that someone like me can enjoy a pretty great world city on a very comfortable budget, but for a typical local who’s earning $150-300 per month (the average salary in the capital, they’re much lower in the smaller cities), their options are severely limited, considering that all of that money would been eaten by rent.

The chief problem has been the collapse of the currency. In dollar terms, the currency has dropped more 3.5 times. Imagine having $3,500 in the bank which overnight turned into $1,000 without you even touching it. To be sure: you’re still paying for stuff in the local currency, so you still have similar purchasing power for locally produced goods, but anything that’s priced in dollars or euros (e.g., vacations to Italy, pair of Levis jeans, BMWs) is suddenly 3.5x more expensive.

Essentially, people are still working the same jobs, working the same hours, doing the same things, but are now getting three and a half times less income in return. That’s nothing less than a destruction of the cost of living.

Politicians are blaming the currency devaluation on “Russia’s aggression” and the ensuing war in the eastern part of the country. And while wars are such crucial events that they can be blamed for any instability in the country, it’s hard to buy this argument because a collapsed standard of living represents many insidious benefits as well. For one, it’s a wet dream of big corporations anywhere. They can hire labor and pay them a lot less money for essentially the same amount of work. That’s just a couple of levels above slavery.

Ukraine For Sale

Ukraine For Sale

European integration

One of the major themes of Ukraine’s post-independence history has been the severing of the country’s relationship with Russia (both economically and culturally) and the closer integration of the country towards the disparate collection of states called European Union.

The “Orange revolution” in 2004 was a peaceful event which signalled the initial power shift from the pro-Russian factions to the pro-European factions. Ten years later, the (more violent) Maidan revolution permanently cemented the pro-European position. Although there’s an opposition party in the parliament (every democratic government has one), there won’t be any kind of close relations with Russia anytime soon.

Politics is always a means to a some economic end. And the name of the game is the integration of Ukraine into Europe. Integration is a nice word, but did anyone bother to look up what this “integration” actually means? I have. And what it really means is that the country will be cut up into small pieces and then auctioned off to the highest bidder. Open borders mean people (i.e., the labor force) will leave the country and migrate to richer countries like Germany or UK, which is something that has happened to the Baltic countries (see how many Lithuanians live in London). The country will also be gutted of its natural resources.

Trade makes a lot of sense when both parties benefit. But the fact of the matter is that Europe doesn’t need much from Ukraine. Everything that Ukraine makes, Europe already knows how to make better and more efficiently. Europe (and America) only want two things from Ukraine: cheap labor and control of the land to serve as a buffer zone between EU and Russia. (The latter is more important than the former).

Many locals told me that Ukraine is being deforested with the wood being sold to Turkey at a steep discount, which then makes furniture and sells the finished product back to Ukraine for a nice premium. This doesn’t benefit Ukraine at all. In fact, it’s the kind of mercantilist relationship that was common between Spain and Portugal and their South American colonies.

Jumping ship

Since I was so insulated from the locals, I didn’t realize that the country is experiencing a mass exodus. It’s one of those things that you don’t know until you start talking to people and asking the right questions. It all comes down to basic economics: getting a well-paying job is extremely difficult if not outright impossible here: unlike a richer place like New York or London, there’s just not enough capital and money to go around.

One option is to quit the measly paying 9-5 and start your own business. When you become your own boss and control your financial destiny, your income possibilities become limitless. The problem is that building a business in Ukraine requires a certain level of toughness and ruthlessness that few people possess. This isn’t America where you have the complete rule of law on your side. Things can be quite “unpredictable” for business owners here.

Thus, your other options are to either continue living on a meager income, live in modest conditions, or pack up and immigrate to a richer country where working in the same profession will afford you a nicer apartment/house in a nice city, a car, and many other amenities that Westerners take completely for granted.

So, why suffer in a country drowning in corruption when you can have a much higher level of living elsewhere?

While men typically don’t need much and can survive in the most rugged and minimalist conditions, women are always trying to see if there’s a way they can do better. Easily half of the women I met here in Kiev are eager to escape to the West—or pretty much anywhere where there are more opportunities—at all costs.

A solid strategy is to marry a Western man with the hope of beginning a new life in the Land of The Free. Another option is to move to a Western country on a tourist visa and then stay there illegally. When I lived in Brooklyn, NY, I’ve met a good share of young Ukrainian women and Russian women working all kinds of odd jobs. I knew for a fact that lots of them were in the country illegally.

It certainly says a lot about the country when its vast female population is desperate to escape anyway it can.

Ukraine is one of the few countries that I’ve been to where I experienced this level of desperation. I didn’t feel this in Brazil, Argentina and other Latin American countries. I also didn’t feel it in Lithuania, another former Soviet Union republic. I suppose another country with a similarly dire situation is Belarus, a closed off country that’s probably even poorer than Ukraine; Russia is a bit richer with a higher standard of living, so its level of desperation isn’t as high as Ukraine’s.

That businessman who is making good money, but is dealing with mountains of red tape and tough-looking guys in black leather jackets coming over for “protection” is dreaming of moving to Australia and scaling his business there. That talented software engineer who’s making $300/month is dreaming of working for Google and making $10,000/month while living in sunny Silicon Valley. That beautiful girl is cringing at the prospect of having her kids grow up here, and would much rather raise them in EU or America where they’ll have much more opportunities and actually become someone.

Fault

The question I keep asking myself as I walk the wide boulevards of Kiev: whose fault is it? Who is responsible for the country’s current mess? Who can fix these problems?

The first answer is communism. As a country which was entirely isolated from the West for many years, and whose economy was entirely controlled by state planning, its industries never had a chance to develop to the level of their Western counterparts. They either made lots of stuff that nobody needed (and had to be thrown out) or made little of stuff that people did need (food, etc).

When communism collapsed and Ukraine became an independent country, it desperately needed to trade with others; state planning and Soviet trade block were a thing of the past. It suddenly found itself as an island surrounded by stronger trade partners on all sides (EU in the West and Russia in the East). Because its economy was so weak and undeveloped, it didn’t really have strong leverage and couldn’t negotiate a strong trade position. This naturally lead to its being exploited by other stronger countries. It was like a little baby who was abandoned by its parents and needed to survive in the tough streets.

But pointing fingers at the country’s past isn’t fair either; communism collapsed more than 25 years ago, and many countries (e.g., Baltic states) have successfully transformed themselves into prospering Western economies. I spent more than two years living in Lithuania, and I can attest that it’s a fantastic place to live and work. It truly feels “European” in every sense of the term.

The leaders of the country share the blame too. Ukraine is the most corrupt place in Europe. As they say, the fish rots from the head. That means everyone and everything below the president, all government organizations, are complicit in heavy corruption in one way or another.

Politicians must take responsibility for the war. No country needs a war, and a poor country teetering on bankruptcy like Ukraine needs it the least. If the politicians wanted, they could’ve negotiated a peace settlement that ended the war yesterday. They could’ve also avoided starting the war in the first place. The fates of the thousands of soldiers and their families are firmly in their hands. They decide the direction of the country. They decide how many lives are needlessly lost.

But there’s also a third party to blame as well: people. With communism long gone, and Ukraine being a democratic country, it’s ultimately the people who decide the country’s future. They vote for the president and members of the parliament. And, failing that, they can always take to the streets and demand reforms or a new government altogether as they did in 2004 and 2014. Corruption can only be so widespread at all levels of government and society if the people themselves believe that “it’s how the world works” and that corruption greases the wheels of the government.

Many locals have told me that it will take a generation or two before the country develops a new mentality, one that will force the government to become more transparent and less corrupt.

Streets of despair

As I walk around the snowy streets of Kiev, I can’t help but have an eery feeling. It’s as though the country is coming apart at the seams. There’s a worry and uncertainty in the air. The liveliness and vitality that was present during my earlier visits is notably absent.

Many questions cannot be easily answered. Will the currency continue to drop more and more? Will the war escalate? Will the financing from the Western countries in the form of debt dry up?

All of this shows a lot of uncertainty. The currency devaluation, the crisis and a lot of this other mess is far from some accident. It isn’t far-fetched to think that the currency devaluation was masterfully timed with the war. It’s classic capitalism: a small number of rich people is getting filthy rich at the expense of the rest 99% of the population.

If this was a random country in Africa, I wouldn’t really care. And who knows, there are probably many countries in Africa that are suffering from an unimaginable level of poverty. But this isn’t Africa. This is Europe. Even though I haven’t really lived here for many years, it’s the only country out of the 85 or so I’ve visited where things just click. It could be because I’m a local who speaks the language. It also could be something special about the people and culture as attested by countless foreign expats who have been living here for many years.

Bright spots

There are also bright spots on the horizon. The war seems to have subsided somewhat. Experts are saying that the currency has bottomed out, especially with the expected infusion of cash from the International Monetary Fund (IMF), a sort of an international bank that lends money to troubled economies.

Most importantly, I’m noticing a younger generation resembling the Westerners in their creativity, productivity, and, most importantly, mindset. This means that in 10 or 20 years, this will be a very difficult country that it is today, a country that will have nothing in common with its communist past nor (hopefully) corrupt present. After all, Ukraine has one of the highly educated populations in the former Soviet Union. There are lots of scientists, engineers and technicians with advanced degrees. It’s my hope they’ll put their talents to work in this country and not somewhere else.

As a location-independent nomad, I should be bouncing around the world. It’s what I do. One friend suggested I hit up Bosnia. Another told me to visit Cuba before it gets polluted by American weekend tourists and McDonalds on every block. There’s also Burma which is gradually growing as an up-and-coming destination but without being developed as its next door neighbor Thailand. And then there’s Brazil, a magical country where I lived for two years, that’s whispering sweet somethings in my ears.

But as strange as it sounds, I’m here in cloudy and snowy Kiev, and I have very little reason to be elsewhere—even when it’s -30C degrees outside, and every day I’m fighting hard to avoid a stepping into a three foot pile of snow, while being surrounded by old, crumbling and decaying Soviet-era buildings. The other 84 countries seem like a world away.

As I sit in this Soviet-era “stolovaya” and eat my delicious “borsch,” I’m eagerly following developments and seeing how everything unfolds. Because from where I’m currently standing, it certainly can’t get any worse.

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20 Comments

  1. Belarus is not poorer, to the contrary. While purchasing power there is not as high as Russian, Russians themselves consider it much less corrupt and safer, not to speak of crime which is way way lower than in Russia. Economy is also experiencing a steady growth, and public property, state administration and facilities, hospitals, schools are in a shape and condition that are miles above the Ukrainian level.

  2. Great write up and analysis mixed with the real “local” experience of actually having lived on the ground and seeing the situation first hand.

    If the vast majority of Ukrainians are siding with the EU like you say, it will still be difficult to discount the influence of Russia in the years to come due to geopolitical factors. Ukraine will be very important to Russia’s security (survival) and resources in the near future for a number of reasons:

    – Ukraine’s high yielding farm lands will be of great important as Russia’s population ages and manpower declines
    – Eastern Ukraine’s oil transporting infrastructure and industrial base is really valuable to Russia for political leverage on the rest of the EU and its own economy
    – Ukraine commands the Bessarabian Gap, which Russia needs control of to secure themselves from any Turkey military aggression. Russia also views Ukraine as a geographical buffer to Europe
    – The Crimean Peninsula is home to Sevastopol, which is Russia’s only true warm-water naval base. They will continue to consolidate power in this region.

    Ukraine sounds like a very unique country to visit and I hope its people get to decide its future, but from everything I’ve read its fate may not entirely be in its own hands.

  3. Gerhard Emmerich

    January 17, 2017 at 7:21 pm

    Great post. Many thoughts came to mind as I read it, but I’m too tired to write all of them down.

    All in all, Hungary is experiencing more or less the same. Shitloads, millions of people have left it, and there are so many problems and so much corruption, that people flee if they happen to have any common sense, courage and stamina. Many of the problems are swept under the rug, and many of the problems is caused by the government, after having seen the people allowing it to happen. That is why people with common sense move away. The country is starting to feel the effects of it. It’s on the verge of total collapse (of course the media paints a different picture), and I believe I’ll see it happening in years. People live on welfare, and it’s unable to find good professionals in areas of life, because those who are, have already left.

    There’s the financial crisis that’s caused by the banks handing out loans in foreign currency. Hundred of thousands of people are suing their banks after realizing what happened to them, and the government claims to have the problem solved: not only did they not solve it, they’ve caused a bigger mess as it were before. All in all, with relatives involved of the people having loans in foreign currency, the people who risk being extradited from their houses onto the streets any day, can be counted as much as about 1.5 Million. Remember, Hungary after about a million people fleeing it, has realistically about 9 million people.

    About changing generations: I don’t have high hopes on the people changing. When you live in a system that only allows you to survive when you are part of the corruption, you either become part of it or die. Those who have became part of it, don’t know how to do it differently. The political system has changed in 1989 without a violent revolution. We have the politicians nowadays who are brought up in that era. They got to the top by being corrupt. So there’s that. Those people who get socialized in a corrupt system, won’t know how to do it differently. Those who left, are not willing to return. And the youngsters being brought up there socialize into the current system. They see how it’s wrong but they can’t fight it so they float with the current.

    And those who would flee to the West, the land of the promise, the first world of modern western civilization? We have rampant feminism, leftists destroying society with their disguised communist agenda. I can understand that fleeing there means a higher standard of living, by simple thinking. But what’s really going on is something that only can be seen after persistent research. Stefan Molyneux videos on youtube are a good start, my friend.

    About the IMF bringing in money: look up in the history of any country: where the IMF appeared and offered money, destruction followed. They will come up with terms that will bring the economy down.

    So seeing all these events and understanding the current state of affairs, one would feel overwhelmed and hopeless. I would advise against it. Live your life, know about what’s happening but don’t put too much emphasis on it. Do your part what you can do – there are plenty of opportunities for you to do so, just recognize them –, and life will eventually turn out great for those who embrace hardships.

    Maybe there were some more thoughts that came to my mind, but these were the most important to share.

  4. I find it interesting that you haven’t met anyone who has returned from US to live. I have lived in Kyiv for 2 years now and I have met a number of people who have returned to Ukraine to live. The sense of family and shock of the costs to live in the ‘west’ all have an effect. Not everyone of course but there are some.

    • There are large community of Russians and Ukrainians in New York where I used to live. I don’t know a single person (or heard of one) who had returned to live a life here.

      I’m not talking about digital nomads, rich people or people who start businesses. Just normal people. They don’t return.

  5. Very good article. Our the past 2 years, I have been to Ukraine around 10 times. Each visit was for around 3 weeks or more, with most trips being in different cities.

    The corruption there is out of control from the top down. If the people want real change, it is going to have to be a complete flushing of the current Governing body. This corruption has roots from politicians down to “aka” the politicians friends. I have seen this first hand myself. Just travel or look about 30 km south of Kyiv on the shores of the Dnipro. I have some good satellite photos people can view of the homes in the area. Not Google photos, these are real satellite photos 🙂 Too many corrupt people trying to lead the country from a 20 million dollar home and not seeing or understanding how the normal people of Ukraine fight to survive daily.

    I found it funny people talk about the old Presidents home and how expensive. I wonder how many Ukrainian people know about these homes south, that would make the old Presidents home look like a shack.

    Ukraine will not get free travel in the EU anytime soon. Sorry to say, but these countries fear the masses invading and never returning to Ukraine. Facts are facts, but Hungry was a good example of what would happen. The EU has another issues to handle right now.

    Trade is a big problem, which will not be solved anytime soon. Sad part is all of this, is it could be a good work in progress happening now, if the corruption was gone.

    Change is going to hurt and it always does. Do you see any of these politicians feeling any pain? What about walking the streets like everyone else does daily.

    First things first. Track down all the offshore accounts of every politician, family members, their fiends and the family members of the friends. Any property owned outside of Ukraine should be counted as assets and taxed. Those G20’s parked away from public eye, used to fly family members and friends to France, weekend sky trip to Italy or Disney Paris would be taxed a higher percentage for flight plans and gas.

    People want things corrected in Ukraine… Start at the top and work down and take no prisoners along the way.

    Love this country, but the people were blind for too many years and do not see the screwing they are receiving.

  6. James, I always enjoy reading your posts and getting your street-level perspectives on countries I’d someday like to visit. I also like your tips on getting to know the local culture — and yes, that includes the local women — and on travel and business in general.

    But what I love the most about your writing is that you haven’t gone down a dark hole like so many of your fellow authors who write with the single male in mind.

    Your tone has always stayed positive, or at least practical, while many of your cohorts have become bitter and whine incessantly about how girls are fat whores, how feminists and smartphones and progress are ruining their lives, and all that other MGTOW/MRA/Man-o-sphere pitiful behavior.

    Keep up the great writing, stay safe, and I look forward to hearing more about your adventures.

    -Erik, San Diego

  7. Fuck the E.U !
    That bitch and her tribe fucked the country .
    First they killed 7 million Ukrainians in one year and now this .

  8. It was a coup . Funded by outsiders to punish Russia for meddling in middle east .
    It was a great country . All minorities were represented in the parliament .
    In fact around 200 members happened to be Jewish and all were getting along well .
    Then local nazi’s were given the power and now it’s a mess.
    How can Nuland being Jewish herself fund the nazi’s .

  9. Where is the slogan Christians are being persecuted .
    Hypocrisy .
    Mr Maverick did you see that image of young white Christian girl with a cross in her neck and baby in her arm ? Both dead and blown to pieces .
    Where is the fight for freedom now ?
    It’s all about the money .

  10. Your posts on Eastern Europe are some of your best. I lived there in the mid 2000s. There is a tremendous amount of educated people in Ukraine. My old company had our IT development and QA teams Ukraine. Did you ever try to put a team together an IT team and do a project there? You seem like the perfect person to do it. Would you have to pay off the “mafia” to start any business there?

    • Thanks Brian.

      Actually, I have been thinking about doing some kind of IT project, etc., here. The costs of living are low and they have highly educated people. Let’s see how it goes.

  11. James, as always a great article from you. Here on the ground and I feel as if people lost hope post two Maidans. A lot of young people I talk to want to emigrate, and you’re right, most do not come back.
    I can see future in Ukraine to do short term IT projects when you need to churn out quality code at a lower price but for anything else it just seems too risky and corrupt.

  12. Vyacheslav Lenskyy

    January 29, 2017 at 4:20 pm

    Friendly advice. Add a created date to your posts.

  13. This is quite precise article, except parts about state of economy of Ukraine right after USSR fall.

    I would say that Ukraine used to have the best position in comparison with other USSR republics.

    They have 2 nuclear power plants, which provides the country with cheap energy. It is very important factor to many parts of economy.
    They had several shipyards in Nikolaev.
    They had Antonov as a builder of big aircrafts. Actually it is still alive, but they can’t compete anymore.
    They had a very good rocketry production in Dnepropetrovsk. Also they had quite a good tank factory.
    Besides that, Ukraine was a place of to rest in summer, for many soviet citizens. So it was a great opportunity as tourist’s industry.

    I would say, that ukrainian economy used to had a very good diversity right after USSR fall.

    Also they do not had any kind of state debt at that moment. Russia had taken all the burden in 1991th.

    —-

    Why they had ruined their economy and get such enormous state dept, is a very big question. It was a big problem even before 2013th. Politicians will keep blaming war for everything, because it is quite easy, but it is only small part of the truth.

  14. I am a man from Ukraine, and I moved to the US. I hate living in the US. Very unfriendly and prejudiced people, horrible women, thousands of little rules that you can break.

    And there are not that many opportunities unless you have some kinds of technical degree. I am not technologically minded and I can’t land a decent job. Plus many people are prejudiced against me because I am not American born. So many haters.

    Money is also not the only factor. You need a good healthy society with good family atmosphere. You need friends. You need to find a good girl to love. How can you get all that in the US? Money and then what?

    I recently actually went back to the UA. So, now you know of a person who did.

    I just need a better income and I can make it online. Just need to figure out the way. I am very close.

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