Where are the reforms? How our beliefs influence economy and the reform progress

“Where are the reforms?” is the catchy phrase that became popular in Ukrainian social media as well as ironic political discussions. As the story goes, Ukrainians were not happy with the slow pace of reforms in 2019 which pushed them to vote against the incumbent president. This example shows a crucial connection between people’s beliefs, their political involvement, and development of the country. What did Ukrainians think about reforms and market institutions during 2015-2019? This question is investigated further.

This chapter refers to the survey data of the Institute of Sociology NAS of Ukraine (1992-2018) and our own survey conducted in March 2019. Attitudes towards privatization, reforms, and market institutions are analyzed and discussed. These data are employed to address two questions:

• How did attitudes to privatisation change in Ukraine since early 1990s and especially in the five recent years of 2015-2019?
• Is there any correlation between support of reforms and support of political leaders?

Context

Economists have long figured out that attitudes of people affect economic performance of a country (Guriev, 2018). On the one hand, all sorts of social groups share beliefs and ideas about what is good or bad for the economy. These ideas influence people’s behavior, engagement and success in economic production and redistribution. On the other hand, the very survival of economic policies in democratic countries often depend on the support of people. The second point is especially relevant for the transition societies. Economic reforms may fail when people do not support their (perceived) outcomes.

While economists and social scientists agree that economic policies are more likely to be successful when population supports them (Denisova et al., 2012; Pop-Eleches and Tucker, 2017), they often disagree on exactly why people vary in their support. Attitudes towards privatisation is perhaps the most salient example that speaks to this debate (Denisova 2016). Some scholars argue that attitudes about privatisation are negative when people experience market failures or economic hardships. Others maintain that anti-privatization (if not anti-market) attitudes are manifestation of values that were internalized during socialization in communist societies (for more details about this debate see Pop-Eleches and Tucker, 2017).

Given that a vast array of scholarly research is focused on attitudes towards privatization and market institutions, this chapter will focus on the same area. Attitudes towards privatization are indicative of how people in transition societies think about market economy in general.

The case of Ukraine

The Institute of Sociology NAS of Ukraine conducted representative surveys from 1992 till 2018 asking Ukrainians about privatisation. The data are available in a hard copy format and can be purchased from this institution directly (Ukrainske suspilstvo, 2018). As Figure 1 shows, most of Ukrainians have negative views about the privatisation of large enterprises. In the early 1990s Ukrainian society was divided in equal parts. About a third of them were positive about this idea, while another third was negative. With time, however, polarization increased. The overwhelming majority of Ukrainians do not support this idea (58% were negative, and 25% were positive in 2018).

Another peculiar change happened with the attitudes towards land privatisation. As Figure 2 shows, most of Ukrainians were positive about privatisation of land in the early 1990s. This has changed dramatically with time (57% were negative, and 20% were positive in 2018 versus 14% and 22% respectively in 1992).

Considering the years 2015-2018 which is the period of recent reforms, a small increase in the support of privatisation occurred. However, when placing this shift in the broader historical perspective, one could see that this change was rather marginal and is not irreversible.

Our previous studies confirm that the variation in anti-privatization attitudes among Ukrainians can be explained by generational replacement and economic hardships. In our forthcoming paper we argue that socialization before the collapse of the USSR has a long-term effect. In times of economic difficulties skeptical worldviews towards privatisation become more salient among older generations (Brik and Shestakovskiy, 2019).

All in all, this long trend of negative attitudes towards privatisation provides a useful context to understand support of liberal reforms in Ukraine. Success or failure of reforms in 2015-2019 depends on the previous shadow of history. One should not expect incredibly positive views about liberal reforms in a society with a trend displayed in Figure 2.

Next, our own survey conducted in March 2019 (N=1,200) includes the data about three areas of reforms: in education, in healthcare, and in pensions (Table 1).

A national representative survey was conducted from March 7th to March 17th, 2019 by VoxUkraine. The survey was supported by the International Renaissance Foundation within the framework of the project “Ukrainians on the Political Compass”. Fieldwork was executed by Vox Populi agency.

As Figure 3 shows, most of the respondents think that reforms are not in progress. What does it mean “to be in progress”? The questionnaire contained a question on the spheres in which reforms are actually happening (in Ukrainian “у яких із цих сфер реформи реально відбуваються?”). It is not equivalent to a positive or negative evaluation. Some respondents might believe that reforms in healthcare are happening, yet they might not like them at the same time.

What are the political consequences of the distribution shown in Figure 3? Tentatively, the data show a correlation between support of reforms that are in progress and voting outcomes. Figure 4 shows the attitudes towards three areas of reforms (education, healthcare, and pensions) for those who said they would vote for Zelenskiy or Poroshenko.

In case of Zelenskiy supporters there was no statistical difference between people who believed that reforms in education or healthcare “were in progress” or “were not in progress”. Yet, those people who believed that pension reform was not in progress supported Zelenskiy more often than those who believed that this reform was in progress.

In case of Poroshenko, the data show consistent significant difference by all three reforms. Those people who believed that a given reform was in progress also supported Poroshenko more often than those people who believed that reforms were not in progress.

All in all, the data show that people who thought reforms were in progress also supported the incumbent, while those who thought the opposite supported Zelenskiy.

Conclusions

Comparative literature shows that people’s attitudes influence economic performance of societies. In the context of transition societies, this link is often mediated by attitudes towards reforms. When people support reforms they can wait long enough to see the benefits of (difficult) economic changes. Thus, understanding attitudes towards privatisation and relevant liberal reforms are pivotal. Survey data from Ukraine suggest that

• Most of Ukrainians do not support the idea of land privatisation. Shares of Ukrainians who disapprove land privatisation increased dramatically from 1992 to 2018. Thus, one should not expect support of land liberalisation soon. Any land reform will face inevitably a strong resistance from people.
• Our previous studies show that people tend to have more negative views about free markets when they face economic hardships and also interpret these hardships as a consequence of market transformations.
• At the same time, there is a political cost of such attitudes. People who do not think that reforms are on the way are less likely to support the incumbents. This also means that when people do see at least some reform progress, they remain supportive of the incumbent politicians. These findings contradict the popular belief that reformists are always unpopular. Reformists can get support in transition societies when people agree that reforms are in progress.

References

Brik, T. and Shestakovskiy, O. (2019). Market orientation in the shadow of communism: 25 years of changes in attitudes about the economy. In Ukraine in Transition. Palgrave Macmillan. Forthcoming.

Denisova, I. (2016). Institutions and the support for market reforms. IZA World of Labor.

Denisova, I., Eller, M., Frye, T., & Zhuravskaya, E. (2012). Everyone hates privatization, but why? Survey evidence from 28 post-communist countries. Journal of Comparative Economics, 40(1), 44-61.

Guriev, S. (2018). Fairness and Support for the Reforms: Lessons from the Transition Economies (No. 24). SUERF Policy Note.

Ukrainske suspilstvo (2018). Monitorynh sotsyalnyh zmin. ISNASU. Kyiv.