by Andriy Sergeyev and Alfredo Moscardini

CAST (Cybernetics and Applied Systems Thinking) Centre, University of Sunderland, UK

Key words: VSM, Governance, Transition Economies, Institutional Transformations.

Abstract

Ukraine has had to change in ten years from a strong centrally controlled communist economy to a market economy.  It has not been successful. This paper uses Cybernetic principles to examine the attempts at Governance over this period.  Using the VSM methodology, we identified serious structural flaws in the organisation of governance at the national level and showed how this induced the formation of mutant strategies at the level of economic agents.  This also allowed us to present credible explanations of phenomena such as barter, corruption, growth of overdue debts and the existence of incentives (other than profit maximizing ones) which drive the behaviour of firms. There are many explanations of the same phenomena in contemporary economic literature but  our explanations are based purely on an analysis of the complexity management tasks performed at each level of recursion:- from a  government to a firm. Moreover, we show that the structural specificity of a system shapes the behavioural patterns of each systemic element, whether it be a government body or a firm’s management. Therefore, the notion of structural determinism allows us to state that structure defines the dynamics of any structural change.

<case study>

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