Sergei Udovik

publisher, writer, journalist, photographer, analyst

Quick economic growth is impossible without the interconnection of society, the electorate, and bureaucracy

By Serhiy UDOVYK

Yevhen Marchuk’s concept laid down in his article, “Sociopolis as Model of a Future Society,” (The Day, September 5, 2000) maintains that Ukraine is embarking on the road leading to civilized progress, albeit one full of potholes. While I support the author’s concept, I would like to dwell on a number of what I consider points of principal importance that seem to have been left out of the article. Above all, I would like to draw the reader’s attention to the notion of human capital. It has been in wide use and spelled out in sufficient length and depth. However, human and intellectual capital do not exist by themselves, as just a collection of subjects with developed intellect. Indeed, they begin to work effectively and manifest themselves only in an interrelationship among such subjects, to which end, as we read in the mentioned article, it is necessary to form an appropriate social order representing a qualitatively new type based on the idea of high social consciousness, self-government, civil society, and social partnership.

Now this system of links (never to be mistaken for any communications systems) between separate individuals and their communities is precisely the most important, crucial component of the postindustrial society now being formed.

This aggregate of human capital satisfied by cultural needs, together with the adequate level of development of communicative contacts, that is, man’s ability to establish effective cooperation, has received the name of social capital.

Precisely, the absence of so to speak communicative capital, rather than that of human capital — in other words, capital based on one’s ability to communicate — is the most important problem facing Ukraine.

The following should be considered as its components:

  • ability of people to establish effective interrelationships and communicate with one another, respect for other people’s opinions and positions — or “recognition of the Other,” to use the psychological term;
  • ability to form a creative atmosphere, recognizing others’ right to self-development and self-realization;
  • the factor of confidence and friendliness, based on universal recognition of ethical norms;
  • corporate culture;
  • development of horizontal connections within society, lowering the role of hierarchical ties, ability to create “molecular” or “matrix” structures;
  • support of the weakest in society;
  • ability to integrate into the habitat, ability to adapt to constantly changing conditions; and
  • fundamentally changing the functions of the state, since the latter is transforming not into the superstructure of this society, but into a coordinating center securing the coordinated development of society, which is being achieved by delegating powers and obligations to the lower levels of administration, reducing the number of hierarchical levels in the structure of administration.


As we see, Ukraine shows polarized processes; the process of disintegrating social contacts and atomization of society isunderway. The best indicator is the number of parties, currently over 100, as well as the number of factions and groups in Parliament. And the population is hiding at home, away from each other and from the state. An attempt to hold back this atomization process and reverse it, is being made using authoritarian methods, by increasing the number and manpower of law enforcement and oversight authorities.

In other words, the old principle of “accounting and control” which proved so very effective back in the Soviet 1930s, is being tried again and updated, except that its engineers seem to overlook the fact that the world has changed completely since then. The population’s educational and intellectual growth calls for the elaboration of new methods of interrelationships within the social organism, new principles of administration, replacement of bureaucratic structures by adchocratic ones, i.e., those dominated by intellectuals. (Our old fried, Noah Webster, never heard of this particular sesquipedalia, but that’s what it says — Ed.).

It is clearly apparent that under the conditions of the so-called administrative reform a “Ukrainian way,” when the bureaucratic and controlling structure are obviously on an upward curve, even a positive decision on the creation of sociopoleis will have the following consequences.

First, a [State] Committee will have to be formed to deal with such sociopoleis. After that a set of regulations will be elaborated, required to set up such sociopoleis, invariably involving:

  • fire departments (to the effect that the planned developments are to be kept safe from fire and that every such sociopolis structure be kept fireproof);
  • the Ministry of Environmental Protection (to the effect that no such sociopolis will in any way endanger the environment);
  • sanitary-epidemic stations (to the effect that no such sociopolis can harm anyone’s health);
  • State Auto Inspection (to the effect that each such sociopolis must be subject to special traffic rules);
  • tax authorities (in an attempt to prove that each such sociopolis is good for tax revenues);
  • Academy of Sciences (saying whether or not it supports the entire project); and
  • local authorities (with their saying whether or not they need sociopoleis in the first place), etc.

Needless to say, each and every of these and other such structures will have special divisions in charge of sociopoleis, subject to relevant state budget expenditures. Of course, this is a matter of nationwide importance. And this is not all.

Inevitably, the issue will arise of forming an agency to develop the criteria of assessing the need to establish these sociopoleis. Evidence will be required to show that they will actually deal with such priorities (proving that a project is really necessary in this country is left to the authors, and this in turn will require the formation of yet another committee to certify such priorities). Also, it will be necessary to prove that the Ukrainian sociopoleis are the best in the world, as attested to in writing by Western countries. Bureaucratic imagining knows no bounds! I would not even attempt to follow this train of thought! But the idea will be apparently to the bureaucrats’ liking. I have precisely this kind of experience. Back in 1992 or thereabouts, all research projects were exempted from the value added tax, although one had to collect countless certificates and affidavits to have the privilege. And our bureaucracy was just making its first tentative steps at the time. Of one thing I am sure; there will be more people working for all such supervisory authorities than there will be people inhabiting such sociopoleis. This constitutes the greatest threat to Mr. Marchuk’s concept.

Suffice it to take a closer look at what the current reform Cabinet is doing, introducing manual control of energy market fuel supplies. A Cabinet member personally supervises fuel oil deliveries (and feels proud of it, which is most surprising). The Cabinet manually allocates budget funds and its members take part in ceremonies of opening retail outlets and other business entities (indices of growth, no doubt), hold endless conferences (apparently meant as a substitute for refresher courses), issue countless resolutions and directives, and is actively engaged in what is known as administrative reform, the only result of which is that we obviously lack additional bureaucratic structures.

One is left marveling at the energy with which the bureaucratic system dating from the 1930s is being revived now that we are stepping into the twenty-first century.


McGregor described two approaches to the evaluation of man’s attitude to work in the form of X and Y Theories.

X-Theory holds it that man is innately lazy and devoid of initiative; he is all set to somehow avoid doing any work and attendant responsibility. Thus total control and strict and most detailed regulations are required. This approach denies the individual any will or interest in any given job; it stipulates a strictly defined chain of command, causing an inherently growing bureaucratic structure meant to allocate resources, allowing for the most minute particulars, and to supervise their utilization at every stage.

Y-Theory maintains that man is an inherently hard-working creature, given to initiative, ambition; man is resourceful, prepared to assume responsibility and intent on implementing his own creative potential. In this sense remuneration is secondary to the set objective. This approach implies the need to let people have as much independence as possible, so they can reveal their creative potential. Here bulky bureaucratic structures are no longer necessary; here over- regulation is no longer an imminent threat. Controlling authorities are sharply reduced in number and ranking bureaucrats find themselves acting as consultants and coordinators organizing interrelationships among the related horizontal structures; these people become teachers and students in the administrative domain, simultaneously directing currents of knowledge and experience; in a way, they are like experts tuning up all those expensive grand pianos to join in a concerto meant to carry out specific tasks.

From what I know, IBM was the first to start implementing Y- Theory in the 1960s, abiding by the following guidelines:

  1. self-made man;
  2. company as a team made up of like-minded people; and
  3. constant rejuvenation, nourishing from man’s inner aspiration for self-perfection and adjustment to external factors, with the customer topping the list;

The self-made-man concept led the need to solve the main problem: how one could actually reveal one’s potential and put it to the best use. It would be naive to assume that prospering Western companies allowed men to be employed after picking them off the street at random. To solve this task, a special system was developed, with internal company training courses topping the list. It was then that IBM and other such corporations came to be known as teaching companies. Intel University was set up in 1975, the world’s first higher school completely financed by a corporation. There are now thirty such universities in the United States. It should noted that the state in the US allows such students and even people taking refresher courses to enjoy more and more privileges. In 1997, President Clinton offered $51 billion worth of direct student grants or tax concessions.

Second, company organization included: maximum delegation of authority, the right to voice and defend one’s own opinion, similar status to everyone on the company payroll, priority of horizontal ties over the vertical (hierarchical) chain of command, delegation of maximum autonomy to all company workers, including auxiliary personnel.

Here over-regulation becomes virtually impossible; at the same time, management begins to play an even more important role in that its coordinating and supporting role increases; an administrator turns into an assistant and teacher for his subordinates.

Third, a system of incentives meant to encourage personal business initiative is developed, creating an atmosphere of creative enthusiasm; people are inculcated with the self-awareness that they are victors. Team and command organizational principles are instilled; at the same time, there is a rigid attestation/certification system, where a final document is signed considering all performance results.

Without going into further detail, as to various measures designed to secure Y-Model development, it should be noted that the IBM experience was studied by Japanese experts and later became the basis of the Japanese miracle.

Hardly anyone in the United States can be surprised by any of the above principles, because they are the cornerstone of the entire Silicon Valley — and the same applies to the most prestigious American corporations, each with its own company culture relying on such basic values and a fundamentally new (compared to Ukraine’s) style of management: heterogeneous, personality-oriented, antibureaucratic, creative, and intellectual.

This is why the United States begets Class B billionaires, people like Bill Gates and his Microsoft Corporation or Oracle Corporation’s Lawrence J. Ellison, both Y-Model products, rather than billionaires like the first Rockefellers and Vanderbilts that snatched money from the X-Model using Mr. Colt. Why, then, blame our oligarchs? Such a model, such relationships. There is one alternative: you are either a punching bag or Mr. Colt (take aim, say your money or your life, and get those X-Model tycoons to empty their pockets).

Such new corporate culture ideas met with support in US federal structures and then the world- famous Reaganomics gave a fresh impetus. In other words, US development, following the Y-Model pattern, gradually entered the hallmarks of a federal policy. Indeed, here lies the guarantee of US prosperity over the past fifteen years. It would be wrong, however, to assume that the local officialdom is giving way easily. Suffice it to read Mr. Clinton’s speeches to see that there has been a consistent struggle to put forth new ideas, particularly in introducing Internet technologies and tax-free Internet trade into the economic and social space of America.


There is a perfectly wrong assumption in Ukraine, to the effect that another ten, twenty, maybe forty years will pass before reform is actually implemented — in other words, a couple of generations. Wrong. The problem is not the change of generations but the system of cognition.

We know countless examples from history when people would remain keen and flexible thinkers, even in their twilight years; they would remain capable of expanding their individual vision and of reaching over and above universally accepted dogmas. Remember Andrei Sakharov in Russia and Vernadsky and Amosov in Ukraine? At the same time, people aged 20-25 may turn out to be real intellectual and conceptual zombies, as evidenced by that attempt to capture the Communist Party headquarters in Kyiv. The boundary line should be drawn not by generations, but by man’s ability to perceive the surrounding world as either black-and-white (i.e., no alternative) or a multihued one. In other words, the criterion is the style of thinking, distinguishing between dogmas and creative personalities. Generations have nothing to do with it.

We can see that certain well known universities are brainwashing young people, instilling in them friend-or-foe and plebeian-or-elite tenets of identification. It would be illusory to expect generational change to make the situation any better. Such fathers, such sons.

Such changes seldom take place of their own accord. To put things in motion one has to exert a certain effort. For this reason, people at the top of the hierarchical ladder assume the greatest responsibility; things can change for the better if they can discard stereotypes and keep pace with the times. There are numerous examples in Western history of precisely such accomplishments and fiascoes.

The best testimony to the above assumption is the sharp decline in the Western European living standard, compared to that in North America (e.g., euro/dollar rate dropping from $1.17 to $0.84). Europe proves to have got stuck using X-Model, local bureaucratic and tax reform skidding. Its social democratic strategies are obviously faltering, forcing affiliate leaders like Gerhard Schroeder to embark on liberal reform. But he and like- minded leaders are doing so inconsistently, trying to use state regulation which results only in lowering European economic competitiveness compared to the United States. Eloquent evidence is found in 1999 investment programs: $125 billion increment in the United States; $150 billion capital exodus in Europe. Ukraine’s future depends on how fast its leadership can respond to the new ideology of world development.

Sociopolis is a system responding to this new ideology, yet it will never work in Ukraine unless positive feedback is secured at all levels of management/administration and a new way of thinking is developed.

The Soviet Union was formed as a polity relying on a strictly negative feedback principle, effectively applying the stick-and-carrot technique, leaning heavily on the stick part. This method was characteristic of the industrial epoch. But in the 1960s Western scholars became aware that too much attention was being paid to stability and regulation, rather than change, and that the later was being grossly ignored. They proceeded to prove that positive feedback was worth being studied in the first place, meaning processes that do not suppress change by definition and that can facilitate it; processes that do not keep a given system/regime steady but reject it, in the words of sociologist Toffler. In other words, here is a process aimed at deliberately liberalizing a given system. IBM built its policy relying on precisely these principles and we know of a great many other prospering firms that have followed suit.

The positive feedback system is a well-known version of the carrot- and-stick method relying mostly on the carrot part. However, the overall impression is that in Ukraine most have heard about the carrot, have but a vague idea what it looks like, and are even less informed about how to use it. What is happening in this country points to the stick being replaced with a cat-o’-nine-tails, brandishing it in a more “delicate” manner but with a broader sweep and harsher impact, meaning that the Ukrainian state is being driven further down a dead end.

I will not dwell here on the system and methods of implementing and operating positive feedback, for this rates a separate article. I would like to point out that it is a complex [comprehensive] system working on nationwide as well as local scale, within the limits of separate formations. In particular, a sociopolis is precisely the kind of structure implying such positive feedback.

The world is evolving in the direction of a comprehensively advanced individual, ones getting into the limelight within a given state, when the state machine begins catering to that individual, not the other way around [as is the case now]. The organization of effective communication (verbal, social, and psychological) between both individuals and with the state is an inexhaustible resource that does not require substantial financial injections, yet it is precisely that which creates the bulk of added value, raising the nation’s living standard.

Mr. Marchuk’s concept of an advanced progress strategy is a fundamentally new psychological precept.

In terms of form and methods of implementation, it could be different, using structures other than sociopoleis or it could be brought to life by making the whole country into a sociopolis. This is a matter of tactics and tradition, yet the whole process would be anything but easy. It would be hard to perceive, because sociopolis means the statu s of a given habitat, rather than its geographic position. Our society is still used to parroting other countries’ experience, without comprehending the inner foundations of such transformations. The stated strategy means that we will no longer be able to automatically follow in others’ footsteps; we will have to become creative, building a habitat so very attractive to outsiders that we will have eventually to enforce foreign expert manpower entry restrictions — meaning people applying from Europe and the United States. If and when we do, we will assert ourselves as a full-fledged nation.

The nation’s creative evolution is the responsibility of those at the pinnacle of the political Olympus. These people are supposed to champion the most advanced ideas, Ukraine’s future depends on their ability to perceive and promote such ideas nationwide.

The Day Weekly Digest, №29, Tuesday, 24 2000



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