The Road to Change: Ukrainian Entrepreneurship between Imperial Pressure and Independence


Historian Tatiana Vodotika explains the role of the Russian state in entrepreneurship and how the artificial pressure on resources has created a "culture of poverty."

Ілюстрація Олександра Грехова

Ukraine and Russia are connected by thousands of visible and invisible threads. Families, memories of studying, cultural contexts, political traditions, common history, and — economics. For centuries, Ukrainian and Russian economies were closely intertwined and interdependent.

It is very difficult to measure the “twilight” of economic dependence, since it is measured not only and not so much in roads and railways or in the amount of direct investment. For the structure and development of the economy, it is also measured in knowledge, ideas, values, models of relationships, and strategies, all of which are crucial. And it was exactly these things that suffered from the destructive and sometimes crushing impact of imperialism.  This impact can be seen through the example of entrepreneurship as one of the drivers of economy, and entrepreneurs as perhaps the most active social group.

The imperial statehood significantly and profoundly affected entrepreneurs’ value system. The values of survival and (self-)preservation dominated and often still dominate this system. Self-realization, development, innovation, implementation of bold ideas and dreams, and even the creation of companies meant to last for generations were rarely considered. Even more rarely did business people have real tools to influence current political practices — beyond the industry lobby or a separate city, where an entrepreneur could be elected mayor (in the 19th century).

The Russian Empire (should one simplify matters, of course) had an unwritten rule: loyalty in exchange for profits.

The goal of keeping business away from the levers of influence on real policies, and the general lack of clear models of business-government relations, are still evident.

Legislative irregularities, such as the operation of foreign firms, use of entrepreneurs as a resource for solving social issues, the fostering of paternalism as a relations model, the prioritization of big business (more convenient for various corrupt agreements), the lack of tools for dialogue and reluctance to establish them and corruption — these trends, laid down during the empire period, remarkably continued in the years of the New Economic Policy (1921–1929). Introduced after a devastating civil war and an unsuccessful attempt to build communism, this policy aimed at reviving the economy of the newly created Soviet republics. Although private initiative quickly proved its effectiveness, this did not soften the Soviet state’s position. The entrepreneur of the 1920s first became a cartoon character, then an enemy, and, finally, a prisoner in a camp in Siberia.

The history of the Vadon dynasty, entrepreneurs from Kherson, illustrates how business in the Soviet Union cost lives. The family owned a factory and a shipyard, but, in 1917, they lost everything and emigrated to France. Only Eugene Vadon stayed in Kherson, and during the New Economic Policy, he founded his own business. He employed former employees of his family company and established the production of agriculture machinery. The company was successful and even appreciated by the city’s authorities. Even before Stalin’s repressions, the Vadons were persecuted and arrested more than once-- the last time was in 1937. Eugene Vadon was shot on March 13, 1938 while his 25-year-old son, Borys, was sentenced to seven years in a prison camp. Borys’ life was destroyed: the son of a repressed parent had no right to quality education and work, and his dream of studying at the conservatory was crushed by the boots of the Soviet system’s repressive machine.

However, private initiative is truly indestructible and, therefore, even in the darkest times of Stalin’s repressions (the 1930s), and more so in the era of Leonid Brezhnev (19641982), entrepreneurship flourished.

The Kachorowski family, who are behind the well-known Ukrainian shoe brand, the Kacho Group, has saved shoemaking skills through the “thaw,” “stagnation,” and “perestroika.” The craft has been passed on from generation to generation: since the late 1950s, the husband and wife, coming home after official government work, sewed shoes by hand, so that, in a few decades, their granddaughter could turn a favorite pastime into their own business. And that is just one example. Private visits to doctors, small ateliers in apartments from Chernivtsi to Donetsk, trade in city markets, and even resale of items from the West (from jeans to cameras) proved that business is indeed able to adapt. All these people, however, lived under the Sword of Damocles-- that is the threat of punishment hung over their heads for their often semi-criminal activities. Due to such pressure, values ​​beyond just survival and making a quick profit could not realized. A respectful attitude towards the state also formed — as towards a resource that should be used, or a partner treating you as a tool for solving problems and whom, hence, could also be deceived. Corruption turned into a clear and acceptable tool; it was price that mattered, not the value. Even in modern Ukraine, there are entrepreneurs who hold this worldview. They are rooted in the models formed in the imperial 19th century.

Also, we should not forget the impact of decades of ambivalent attitudes towards business and entrepreneurship.. On the one hand, success generated envy, because everyone wanted to be rich. On the other hand, it generated disrespect due to the belief that being rich is shameful, because it definitely involved dishonestly earning money. Business was dishonest because, for example, there was no way to open a coffee shop without bribing a city official (and it did not matter whether it was 1880, 1925, or 1995). It was dishonest, too, because how could one start a factory without having a generously paid lobby in the government and guaranteed orders for products (whether in 1895 or 1995)?

Lack of understanding of entrepreneurial values ​​ as well as disrespect for wealth, which hides envy and disbelief in one’s own ability to change life for the better, has not enhanced the business environment.

Decades of disrespect for entrepreneurship spawned a “culture of poverty” and still keep Ukrainians and those with businesses within the paradigm of focusing only on the values of survival. The role of the Russian Empire in this and, more broadly, the Russian state, is crucial. For decades, artificial pressure on resources was created, the development of Ukrainian lands was determined by imperial interests, and imperial models of social relations, imperial values, and paternalism ​​were instilled at all levels.

Research demonstrates that even those Ukrainians who understand the importance of economic freedoms interpret them in their own specific way. Entrepreneurship, for example, is considered a way out of poverty, but only if “someone minimizes all the risks, trains, and sets the business up.” That is, it is not just about “giving a fishing rod and teaching to fish,” but also about “ensuring a minimum catch.” However, entrepreneurship and business are not really about that, but, instead, about risk, courage, open-mindedness, and willingness to accept challenges and be responsible for one’s own decisions. Ukrainian society is still overcoming these consequences of postcolonial thinking.

Modern Ukrainian businesses demonstrate two things at once. On the one hand, the impact of the colonial legacy manifests in a number of small things — from restaurant names in southern cities, to paternalism and business strategies. For instance, what do the restaurant names “Alexandrovsky” or “Sovremennik” (in Odesa) and the requirement to guarantee state orders to a plant have in common? The unobvious answer is the imperial past. It is often the basis for both the business name and the business model. On the other hand, it is business that can lead to new values ​​and, ultimately, liberation from the impact of the Russian imperial pressure. In modern independent Ukraine, exercising entrepreneurial initiative, aware of potential risks and able to act legally and for a long time, is a tool of liberation from the colonial legacy.

The previously mentioned case of the Kachorovski family is not only an example of how business survived a system that considered it criminal. It is also about the value of family traditions, flexibility, and willingness to take risks and build a business using new models. Currently, the functions within the Kacho Group are divided among the family members. The business is readily diversified — they not only make shoes, but also clothes, and they offer excellent coffee in their stores. During the war, their capacities have been repurposed to the making of comfortable and high-quality military ankle boots. After all, understanding its role and responsibilities is perhaps the key value for a business. The war has once again proved that the values ​​of freedom, responsibility, and civic unity are crucial — for survival.

Translator: Nataliia Volianets