Prag­matic pa­ter­nal­ism

How ex­pe­ri­ence and ve­nal cal­cu­lus are turn­ing some Ukraini­ans away from lib­eral re­forms

The Ukrainian Week - - CONTENTS - Maksym Vikhrov

De­spite strong de­mand for change in Ukraine, a sig­nif­i­cant por­tion of Ukraini­ans does not support a course of lib­eral re­forms. Ac­cord­ing to a re­cent poll by the Rat­ing group, nearly 60% of Ukrainian vot­ers still be­lieve that the state should be re­spon­si­ble for their lives, 40% support the equal­iza­tion of in­comes, and nearly 50% want to see the state-owned share of busi­ness and in­dus­try in­creased. More­over, 70% of Ukraini­ans are pre­pared to give up some per­sonal free­doms in ex­change for greater law and or­der in their coun­try.

Typ­i­cally, a pref­er­ence for pa­ter­nal­ism clearly cor­re­lates with the age, ed­u­ca­tion and prop­erty in­di­ca­tors of re­spon­dents. The high­est pro­por­tion of op­po­nents of lib­er­al­ism is among those over 60 who have only pri­mary ed­u­ca­tion and con­sider them­selves poor. The low­est share is among those aged 18-29 with a univer­sity de­gree. In pub­lic dis­course, this men­tal­ity is of­ten dis­missed as the “so­vok” or soviet men­tal­ity, lumpen prole-ism, and so on. How­ever, the heart of anti-lib­eral at­ti­tudes does not nec­es­sar­ily lie in an ir­ra­tional re­jec­tion of free­dom or ide­o­log­i­cal rigid­ity. A closer look shows that the re­jec­tion of lib­eral re­forms in Ukraine is based on wide­spread ex­pe­ri­ence and a prag­matic per­sonal cal­cu­lus.

Gen­er­ally speak­ing, lib­er­al­ism means that in­di­vid­u­als en­sure their own ma­te­rial needs by com­pet­ing on the la­bor mar­ket while state pol­icy is largely de­ter­mined through the com­pe­ti­tion of var­i­ous so­cial forces in the leg­is­la­ture and civil so­ci­ety. The power of the govern­ment should ideally be re­duced to the role of a night watch­man, so to speak. This way of or­ga­niz­ing life has many ad­van­tages but it’s not for ev­ery­one.

Lib­er­al­ism is a pow­er­ful stim­u­lus for eco­nomic growth but it in­evitably results in dif­fer­ent so­cial groups be­ing in an un­even po­si­tion. Po­ten­tial losers in this en­vi­ron­ment are the poor who, hav­ing no cap­i­tal, are un­able to take ad­van­tages of the op­por­tu­ni­ties of­fered by en­trepreneur­ship, and those whose ed­u­ca­tion—or lack thereof—puts them at a dis­ad­van­tage on the la­bor mar­ket. In short, all those who have the least chance of win­ning the com­pet­i­tive strug­gle in a mar­ket en­vi­ron­ment. Such in­di­vid­u­als feel more con­fi­dent when ben­e­fits are dis­trib­uted by a govern­ment that guar­an­tees ev­ery­one a min­i­mal level of well-be­ing, and not by the mar­ket.

In the­ory, which has been per­sua­sively con­firmed in in­ter­na­tional prac­tice, the tran­si­tion to a free econ­omy even­tu­ally ben­e­fits ev­ery­body, but the time­frame for Ukraini­ans to suf­fer through has be­come quite short. In a poll taken in 2017 by the National Academy of Science’s In­sti­tute of So­ci­ol­ogy, only 6% of them are pre­pared to suf­fer as long as nec­es­sary, while an­other 33% are pre­pared to be pa­tient, but not for long. Mean­while, 21% don’t want to put up with it at all any more be­cause they al­ready feel they are in an in­suf­fer­able po­si­tion, while 29% aren’t will­ing sim­ply be­cause they don’t be­lieve that the re­forms will suc­ceed.

What this sug­gests is not that or­di­nary Ukraini­ans are capri­cious but that they are mak­ing a very ra­tio­nal cal­cu­lus. To suf­fer through dif­fi­cul­ties when you don’t be­lieve in an ul­ti­mate pos­i­tive out­come is ab­surd, even when op­por­tu­ni­ties present them­selves. Those who are al­ready vul­ner­a­ble can no longer suf­fer be­cause they sim­ply don’t have enough eco­nomic re­serves left. This is what un­der­lies an ob­vi­ous so­cio-po­lit­i­cal para­dox: those who find them­selves in a dif­fi­cult sit­u­a­tion are more in­clined to support the sta­tus quo than ur­gent rad­i­cal re­forms. This flies in the face of no­tions of the rev­o­lu­tion­ary po­ten­tial of those who have “noth­ing to lose but their chains,” but it’s en­tirely true in Ukraine to­day. Any ground­break­ing eco­nomic changes will in­crease per­sonal risks, and the stakes are high­est pre­cisely for the poor. Where the mid­dle class has eco­nomic re­serves, the poor risk end­ing up in ex­treme poverty.

What’s more, the prob­lem is not only in at­ti­tudes to­wards lib­er­al­ism it­self but also in a lack of trust in those re­spon­si­ble for and un­der­tak­ing th­ese re­forms. His­tor­i­cally, no Ukrainian Govern­ment re­ally had a mea­sure of trust at its dis­posal that was enough to un­der­take fun­da­men­tal re­forms: or­di­nary Ukraini­ans had doubts about both the mo­tives of the re­form­ers and their ca­pac­ity to prop­erly im­ple­ment what they were propos­ing.

To some ex­tent the blame here lies with in­di­vid­ual politi­cians and groups who have cho­sen the path of pop­ulism. How­ever, just chang­ing the in­di­vid­u­als in­volved will not solve the prob­lem, as the nega­tive col­lec­tive ex­pe­ri­ence of Ukraini­ans dur­ing the long cri­sis of the 1990s can­not sim­ply be deleted. Ac­cord­ing to mon­i­tor­ing by the NAS In­sti­tute of So­ci­ol­ogy, Ukraini­ans were greater sup­port­ers of lib­er­al­ism at the dawn of in­de­pen­dence than they are 27 years down the line (see Resistance force). For in­stance, 25% of them sup­ported the pri­va­ti­za­tion of large en­ter­prises in 1992, while 32% op­posed it. A decade later, in 2002, the rel­a­tive shares changed to 18% and 55%, while in 2016 it was 14% and 62%. Mean­while, the un­de­cid­eds came down to 24% from 42%. Support for the pri­va­ti­za­tion of small en­ter­prises went from 56% in 1992 to 32% in 2016, while op­po­si­tion has risen from 14% to 37%. At­ti­tudes to­wards the lib­er­al­iza­tion of the land mar­ket have shifted equally dra­mat­i­cally to­wards the nega­tive. In 1992, 63% of Ukraini­ans sup­ported it and only 14% were against, but by 2016, the num­bers had prac­ti­cally re­versed: less than 17% fa­vored it while 59% were against.

With­out doubt, the col­lapse of il­lu­sions and ex­pec­ta­tions dur­ing the re­con­struc­tion pe­riod played a se­ri­ous role here. But there’s no ques­tion that the be­hav­ior of Ukrainian Gov­ern­ments has also pro­voked con­sid­er­able neg­a­tiv­ity. To be fair, not one pres­i­dent or premier planned to in­sti­tute shock ther­apy on the coun­try, but be­cause of cor­rup­tion and their in­ca­pac­ity to gov­ern prop­erly, the re­sult of­ten turned into pre­cisely that.

A clas­sic ex­am­ple is the ef­forts to re­struc­ture the coal in­dus­try, which had to be brought in line with the re­quire­ments of a mod­ern mar­ket econ­omy. Re­forms were ex­pected to in­volve not only the shut­ting down of un­prof­itable mines but also the re­train­ing of work­ers, the pro­vi­sion of re­place­ment job op­tions, and other sup­port­ive mea­sures. How­ever, over 1995-2002, in­stead of the planned UAH 9 bil­lion be­ing al­lo­cated, only around UAH 3bn was, and, of that lesser amount, the Ac­count­ing Cham­ber says that at least 10% was used “in­ef­fec­tively” or “un­law­fully.” More­over, funds

Ac­cord­ing to a re­cent poll by the Rat­ing group, nearly 60% of Ukrainian vot­ers still be­lieve that the state should be re­spon­si­ble for their lives,

40% support the equal­iza­tion of in­comes, and nearly 50% want to see the state-owned share of busi­ness and in­dus­try in­creased

pro­vided by the World Bank in support of re­struc­tur­ing the in­dus­try, US $150 mil­lion to be ex­act, were used “not as des­ig­nated.”

The sit­u­a­tion with find­ing re­dun­dant coal work­ers new jobs went no bet­ter. Over 1996-2001, nearly 100 mines were closed, but only 6% of the plan for new jobs was im­ple­mented. It was be­cause of this kind of thing, and not some kind of ide­o­log­i­cal re­jec­tion of mar­ket re­forms, that the idea of re­struc­tur­ing the in­dus­try was de­spised so much in the coal min­ing re­gions. Since then, lit­tle has changed. Need­less to say, far from all Govern­ment ini­tia­tives meet with fail­ure. For in­stance, a rel­a­tively ef­fec­tive sys­tem of sub­si­dies made it pos­si­ble to tran­si­tion to mar­ket prices for en­ergy with­out the level of shock that skep­tics pre­dicted. Still, the way govern­ment agen­cies func­tion leaves a lot to be de­sired, and so re­forms can have un­ex­pected con­se­quences.

This is par­tic­u­larly true of the bank­ing sec­tor, ju­di­ciary and prop­erty rights, the tri­pod on which a mar­ket econ­omy stands. The Global Com­pet­i­tive­ness In­dex, in which Ukraine ranks a very dis­tant 128th among 137 na­tions. For the pro­tec­tion of in­tel­lec­tual prop­erty rights (IPR), it’s 119th, for the in­de­pen­dence of its courts, 129th, and for the sol­vency of its banks, al­most at the bot­tom at 135th. Th­ese and other prob­lems not only un­der­mine the con­fi­dence of po­ten­tial for­eign in­vestors, but also spur do­mes­tic resistance to re­forms: a mar­ket econ­omy with weak in­sti­tu­tions fos­ters ar­bi­trari­ness and abuse. Take the land mar­ket is­sue. Ac­cord­ing to the NAS In­sti­tute of So­ci­ol­ogy, a 2012 poll of the own­ers of shares of farm­land and those who process agri­cul­tural prod­ucts were against the sale of farm­land be­cause they were con­cerned about com­pe­ti­tion with Big Busi­ness and for­eign­ers, re­sources be­ing used im­prop­erly, and sim­i­lar is­sues. Since then, at­ti­tudes have not budged: a poll by USAID’s Agroin­vest, 80% of Ukraini­ans are wor­ried about one or an­other of th­ese threats if a land mar­ket is formed, although 55% of them also see some ben­e­fits.

As to pri­va­ti­za­tion, a 2017 poll by GfK Ukraine re­vealed that the main fear was that the terms and con­di­tions of ten­ders would be de­signed in the in­ter­ests of spe­cific oli­garchs. Given the poor anti-mo­nop­oly leg­is­la­tion and sys­temic cor­rup­tion on the part of oli­garchs with good con­nec­tions to the govern­ment, such fears are hardly un­founded. Doubts about med­i­cal re­forms are also mainly con­nected to dis­be­lief that they will be prop­erly car­ried out. Ac­cord­ing to GfK Ukraine, among those who are fa­mil­iar with the re­struc­tur­ing of the health­care sys­tem, 44% support it, but 52% are against. Nega­tive ex­pec­ta­tions are typ­i­cal of less well-off in­di­vid­u­als, who fear that cor­rup­tion will not dis­ap­pear, ser­vices will not im­prove, and many ru­ral ar­eas could find them­selves with­out a hos­pi­tal al­to­gether.

And so, the fact that many Ukraini­ans are not happy about lib­eral so­cio-eco­nomic par­a­digm is only marginally driven by ide­ol­ogy. It’s quite prob­a­ble that the rea­son for their nega­tive at­ti­tudes is that they don’t see the re­forms as im­prov­ing their lives: some be­cause they can’t com­pete on the la­bor mar­ket, some be­cause they don’t ex­pect the stated results to ac­tu­ally be reached, and oth­ers be­cause they don’t be­lieve that mar­ket mech­a­nisms won’t also be abused. The first is­sue is linked to the vul­ner­a­bil­ity of pock­ets of the pop­u­la­tion and not much can be done about it for now. Poor Ukraini­ans will be­gin to be­lieve in lib­er­al­ism when they can see and feel its im­pact. Un­til then, re­form­ers will sim­ply have to try to over­come their skep­ti­cism and dis­sat­is­fac­tion.

The sec­ond com­po­nent is much harder to deal with as it’s strongly linked to dis­il­lu­sion­ment in gov­ern­ments and in­sti­tu­tions. While a po­lit­i­cal team can man­age to—at least the­o­ret­i­cally—gain vot­ers’ trust and hold on to it for a com­plete term, restor­ing trust in in­sti­tu­tions will take much longer be­cause it re­quires pro­vid­ing peo­ple with a more pos­i­tive com­mon ex­pe­ri­ence. This doesn’t mean that Ukraine should re­ject lib­eral re­forms out­right. For the next few years, how­ever, they are doomed to be un­pop­u­lar and politi­cians should ac­cept that.

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