Freeing Ukraine’s captured state

In public discourse, oligarchs are often named as one of the reasons for Ukraine’s slow economic development.

The main difference between an oligarch and a typical businessman is in an oligarch’s influence on politics and state authorities that they use to set the rules of the game for the benefit of their own businesses.

Illegal competitive advantages are one of the sources of oligarchs’ profits. In particular, restraining competition and monopolization of certain economic sectors, which is achieved through political influence, allows them to increase their prices. Tax concessions, subsidies, and preferences in access to public resources allow them to reduce expenses. Influencing politics through changes in laws, policy, and regulation of unfair benefits for a particular business is a form of corruption described by the term “state capture”.

State capture leads to significant social losses. Capture of regulators enables to restrain competition. Higher prices due to restraining competition means less consumer surplus. Maximization of profits by increasing prices leads to a decline in production.

The aim of the analytical note “Freeing Ukraine’s captured state” is to explore whether there are signs of state capture by the oligarchs in Ukraine, what are the aims, mechanisms or consequences of such capture, and how to minimize its negative outcomes.

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