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The economist and the crowdfunded army

Soldiers in the Ukrainian Azov battalion pray near the Bohdan Khmelnytsky monument in Kyiv before embarking on a campaign. (Photo by Sergii Kharchenko/NurPhoto)

In 1997, when he was 18 years old, Alex Nikolsko-Rzhevskyy opened two bars in his hometown of Odesa along the Black Sea in southern Ukraine.

Four years later, he says, a government official proposed that he sell the bars to the official’s relative for a deeply discounted price. Nikolsko-Rzhevskyy, who had just completed his master’s degree in physics at Odesa National University, declined.

“In those times,” he says, “government officials were slowly becoming the real mafia in Ukraine. It was easier to reach a consensus with local gangs.”

Within a week the official closed down both bars and demanded a large bribe, falsely accusing Nikolsko-Rzhevskyy of tax evasion. Nikolsko-Rzhevskyy refused to pay the bribe and instead relinquished his businesses, figuring that the corruption wouldn’t stop even if he could afford to pay the bribe.

“I decided to stop trying to do business in Ukraine until corruption was eliminated,” he says.

Nikolsko-Rzhevskyy moved to Kyiv, completed a second master’s degree at the Kyiv School of Economics, and relocated to the United States in 2003 to start working on a Ph.D. in economics at the University of Houston.

An historically complicated relationship

Today, he is an assistant professor of economics in Lehigh’s College of Business and Economics. A specialist in monetary policy, he recently coauthored a paper that examines the Federal Reserve’s use of discretion versus traditional policy rules in setting the federal funds rate. The paper has been cited in The Wall Street Journal, Bloomberg and the U.S. Congress.

Recent events in Ukraine have prompted Nikolsko-Rzhevskyy to turn his thoughts to his homeland and once again to expand his horizons. In addition to monetary policy, he is now investigating classes of bulletproof vests and the features of army boots. Like many Ukrainians, he has become an expert in the paraphernalia of war.

As the historically complicated relationship between Russia and Ukraine fractures, says Nikolsko-Rzhevskyy, Ukrainians around the world are crowdfunding their army.

When Russia occupied and annexed Crimea in March, he says, Ukraine had no army. In 1994, as part of the Budapest Memorandum on Security Assurances, the former Soviet republic had surrendered its nuclear arsenal in exchange for the promise that Russia, the United States and the United Kingdom would guarantee its territorial integrity and refrain from the threat or use of force against it.

Believing Russia would protect its smaller neighbor, says Nikolsko-Rzhevskyy, Ukrainians stopped investing in their military. Over time, its government destroyed what remained of its armed forces. And after Russia annexed Crimea, what Nikolsko-Rzhevskyy calls pro-Russian terrorists in eastern Ukraine launched an armed rebellion, which Ukraine and the U.S. accuse Russia of supporting.

“The whole country was in complete shock,” says Nikolsko-Rzhevskyy. “Russia was the very country that promised to protect us from foreign invasion. This came as a complete surprise.

“So we all tried to somehow start building an army because we understood if we did nothing, we’d just lose the country as we know it.”

A war of information

The Ukrainian government broadcast a phone number for donations to its army fund. In the first week, Nikolsko-Rzhevskyy says, the government collected $16 million.

“Battalions were fighting in t-shirts and shorts and sneakers,” he says. “Ukrainians worldwide started looking for places to buy uniforms. People were buying used uniforms from the Polish army and bringing them to Ukraine and physically driving to the front lines and distributing them to people.”

In addition to arming the soldiers fighting for his home country, Nikolsko-Rzhevskyy wants to ensure that the world is armed with information about what is actually occurring in the region. Beyond the front lines, Ukrainians are fighting a war of information, a war for which they once again have few resources.

Nikolsko-Rzhevskyy warns that propaganda and misinformation play a significant role in public perception of the events in his country. Only Russian television channels broadcast in occupied Crimea and in eastern Ukraine. One news story, he says, accused the Ukrainian army of atrocities against women and children. “It’s a rip off of the Game of Thrones episode that aired two weeks before,” he says, referring to HBO’s fantasy drama TV series. Another horrifying Russian TV “news” story came straight from one of BBC’s Sherlock episodes.

“When you hear things like that,” says Nikolsko-Rzhevskyy, “yes, some Ukrainians in eastern Ukraine honestly believe they are fighting fascists... Some Russian volunteers go fight to defend the so-called republics and then die for a lie, which is very sad.

“The reality is that eastern Ukraine and its citizens are now in the hands of Russian-financed criminal gangs that rob banks and jewelry stores, kidnap local business owners for a ransom, and torture and kill opponents.

“That is why right now the informational war is at least as important as the actual war. We need people to know the truth and be able to separate it from Russian-style, Goebbels-type propaganda.”

Western journalists try to stay fair and assume that the truth is somewhere in the middle, he says, but “the Russian image of the universe is so skewed, so far from reality, that the truth is not in the middle, unfortunately. Yes, Ukraine’s picture could at times be biased too, but the propaganda that Russia spreads is just so far away from what is going on. It’s unbelievable.”

Nikolsko-Rzhevskyy has also helped develop a proposal for the new Ukrainian government to change parts of the country’s constitution. A fundamental flaw of the constitution, he says, is that it gives the Ukrainian president the power to appoint local governors rather than allowing Ukrainians to elect them. This has caused considerable internal conflict throughout the country’s history.  

The proposal, which has involved economists from around the world, focuses on political and economic decentralization. The Ukrainian congress and president have come up with a counter proposal which Nikolsko-Rzhevskyy says is not ideal but is a step in the right direction.  

Nikolsko-Rzhevskyy continues his aid efforts from the U.S., ordering supplies, researching equipment and reaching out to local hospitals to request assistance for the wounded. He is quick to dismiss the importance of his role, saying it is not as large as he would like it to be. He is inspired by the passion of his people and, though hopeful, afraid of what the future might bring.  

Nikolsko-Rzhevskyy’s parents, brothers and extended family still live in Odesa. The city is now relatively quiet, having resisted Russian efforts to organize protests earlier this year.

“I was thinking this past spring that chances were probably around 50 percent that my country would disappear, and the next time I would come to Odesa it would be Odessa, Russia,” he says. He feared he would never be able to return home, as his public disagreement with the annexation of Crimea, he says, is in violation of Russian law.  

“Right now, I think Ukraine has a strong army, not only of people who serve for money, but also of those who sincerely love Ukraine and are ready to die for it and for our freedom. If Russia decides to openly invade Ukraine in a demented attempt to rebuild USSR 2.0, there will be bloodshed with tens of thousands dead on both sides. Ironically, it would have been better if they had invaded when it all started. We would lose our country but the lives of people would still be there.”

As for the Ukrainian people, Nikolsko-Rzhevskyy is proud of what they’ve accomplished. He sees its people coming together and fighting for change.

“It’s absolutely amazing. I could never think that the whole country can work in unison. It’s a sign that democracy can work. You can build a country from the ground up.”

Story by Kelly Hochbein

Posted on Monday, August 18, 2014

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