Reforms and Re-Election: Will Groysman Become Yet Another “Political Kamikaze”

Many politicians are worried by the idea that their political career may end prematurely if they undertake substantial reforms. However, both academic studies and the experience of post-Soviet countries show that reformers are not doomed to become “political kamikaze”. Based on the examples of Georgia, Slovakia and Latvia, this article reveals some patterns that define the political destiny of reformers – and can influence the career of the newly appointed Ukrainian Prime Minister Volodymyr Groysman.

Jean-Claude Juncker famously expressed the fear many politicians have of reforms,

Known as the “Juncker Curse”, these words concerned the need for structural reforms in the EU member states. Perhaps, Juncker knew what he was saying, given that he became the longest-serving head of any national government in the EU? Indeed, the cost of reforms can often be seen immediately, while their benefits may take some time to appear. Arseniy Yatsenyuk, the former Ukrainian prime minister, apparently shared this sentiment, although in a somewhat different context, having famously called his ministers “political kamikaze”. His successor Volodymyr Groysman is ready to sacrifice his political career for the sake of reforms, yet he believes that reformers can stay in power if they communicate with voters wisely. Who is right? Are reformers doomed, having to pay for reforms with electoral losses and the end of their political career? This is an important question, since similar views can stop politicians from undertaking reforms.

Studies show that undertaking reforms does not decrease the probability of the re-election of reformers

Buti (2010) has analyzed election results in the aftermath of pro-market reforms in the OECD countries in 1985-2003. It found no connection between the implementation of reforms and the re-election chances of their initiators.

At the same time, it did find that certain factors affect the re-election probability of reformers (see Table 1 at the end of the article). For instance, reformers are more likely to be re-elected in countries with liberal financial markets. The latter are supposed to smooth the cost of reforms. Having a clear electoral mandate for reforms also makes re-election more probable (see also this study). However, electoral losses increase if reforms “hurt” large groups. This makes the design of reforms important: unpopular reforms have to be accompanied by more popular measures. At the same time, governments cannot “bribe voters through fiscal handouts”. Both Buti (2010) and Brender&Drazen (2008) find no positive link between fiscal stimulus and re-election probability. Interestingly for Ukraine, the study did not find any connection between the electoral consequences of pro-market reforms and the popular attitude to a market economy in general.

There are some difficulties inherent in the design of such studies(see discussion). The results of Alesina (2011) may thus be less controversial. The study analyzed the electoral consequences of large reductions of budget deficits in the OECD countries. The conventional wisdom is that voters do not like such policy because of the ensuing drop in income and social protection levels and increase in unemployment. However, the study found no evidence that “even large reductions of budget deficits are associated always (or most of the times) with electoral losses.”

Post-Soviet countries are probably not an exception

The aforementioned studies do not consider post-Soviet countries. Hence, doubts may arise as to whether their results apply to Ukraine, given the fundamental character of changes and possible cultural differences. Indeed, almost all post-communist governments in democratic countries in Central-Eastern Europe lost their first elections. Later in Slovakia, successful reforms by Dzurinda and Miklos did not help them win the 2006 election. In Georgia, despite fundamental reforms, Mikhail Saakashvili was not re-elected in 2012. Does this mean that post-Soviet countries are an exception?

The first observation definitely has some truth to it. However, the scale and speed of changes and the depth of the crisis in the transitional period put all governments in a very precarious situation, regardless of their specific actions. The situation was unprecedented; there was little relevant experience, so the implemented policies were probably far from perfect.

The defeat of Dzurinda’s government in Slovakia might also seem illogical. Prime Minister Dzurinda, together with Miklos, his minister of finance, undertook profound reforms of the country’s economy.

GDP growth accelerated from 4.1% in 2002 to 8.3% in 2006, while unemployment fell from 18.5% to 13.3% in the same period. Nevertheless, Dzurinda’s party lost the 2006 election. Was dissatisfaction with the reforms indeed the main reason?

At least two arguments speak against such a conclusion. Firstly, as of 2006, Dzurinda had stayed in power for eight years. In parliamentary democracies, one political force rarely stays in power for long. Voter fatigue, accumulated political mistakes and such external factors as economic crises – all those factors may contribute to the electoral defeat of long-lived governments. Secondly, as The Economist put it, “economics is only part of the story”. Even though the reformers managed to streamline the country’s economy, they did not succeed in transforming the corrupt and bureaucratized state administration and judicial system. Thus, it was the lack of reforms in some areas, not their excess, that was partially responsible for the defeat of the reformers.

Another case that seemingly shows that reformers are doomed to lose power comes from Georgia. Saakashvili lost the 2012 election despite the unique reforms he oversaw. However, Saakashvili actually won his first election after implementing large part of the reforms. Moreover, he had stayed in power for eight years before losing the election. Again, this points to possible voter fatigue and the accumulation of mistakes by his government. There are no reasons to believe that his defeat was caused by popular dissatisfaction with the reforms. Some months before the election, all the polls and surveys sshowed that Saakashvili would easily win it. It was probably the recordings of torture in a Tbilisi prison, seen by all the Georgians shortly before the election, that hurt Saakashvili’s re-election chances most. Commentators also noted that his confrontational style antagonized many of his supporters. Finally, his communication strategy was less intense than during the previous election campaigns.

Latvia: tough measures that did not prevent the re-election of reformers

At the same time, the examples of Latvia and Estonia show that reformers in post-Soviet countries can be re-elected, even after overseeing radical measures (see the chapter by Salines and Berzins). The 2008 financial crisis led to a 22% drop in Latvian GDP. Unemployment rose to 20%. In 2009-2011, in an effort to restore the country’s competitiveness, the government enacted harsh austerity measures (equivalent to 17.5% of GDP). Nevertheless, Prime Minister Dombrovskis won the elections in 2010 and 2011.

One of the reasons for his success was an active and coordinated communication strategy. Dombrovskis and his team repeatedly emphasized the absence of alternatives to the reforms and gave “a sense of direction”. They constantly underlined that austerity was not an end in itself, but was required for receiving international financial assistance (an IMF loan) and, more importantly, the adoption of euro. The cohesion of the government was illustrated by the finance minister’s willingness to accept responsibility for the government’s mistakes, thus helping to protect the prime minister. No doubt, the perspective of joining the euro area served as a powerful external incentive. It underpinned the success of the communication strategy and helped forge a social consensus.

The popular perception of reforms as fair was also important. Latvia has one of the highest levels of inequality in the EU. Latvians highly dislike all measures that are likely to deepen it. The previous prime minister tried to implement austerity measures, but lost power after protests erupted and his coalition collapsed. Dombrovskis, on the other hand, managed to at least create an impression that the elites and the rich were not treated preferentially. It also helped that he stayed in opposition for years and that he criticized the generous fiscal policy of his predecessors long before the crisis.

It is also important to remember that losing an election is not equivalent to the end of a political career. Reformers need not become “kamikaze” even if they lose their first election after reforms. Indeed, in Estonia, post-communist reformers lost election after overseeing the “shock therapy” reforms, yet they were re-elected five years later.

Experience of reformers and challenges facing Groysman

The newly appointed government cannot create a developed financial market overnight. The perspective of joining the EU, or a similar external incentive, is also out of the question, at least for now.

However, Groysman’s first interview in his new role seems to show that he understands the importance of the aforementioned factors. A transparent and active communication strategy is especially important. Despite the popular demand for change, there is little understanding in the society of what particular measures are needed. The sense of the direction of reforms is also missing. Voluminous and inaccessible government action plans cannot provide it. It is thus crucial for Groysman to actively outline his goals and explain the importance of the steps his government is undertaking. The government would also benefit from winning the support of well-regarded NGOs, such as the “1st December” Initiative, the Reanimation Package of Reforms and VoxUkraine.

Nevertheless, the composition of reforms is going to be decisive. It is important to ensure that Ukrainians view reforms as fair. The government would be ill-advised to ignore their requests and engage in selective reforms instead. For instance, reforming gas prices is necessary (as part of a more comprehensive gas market reform). However, given the slow progress of systemic reforms, little progress in fighting corruption and investigating the crimes committed during the Euromaidan, it may seem that the state is simply trying to solve its problems at the expense of ordinary people.

Economic problems are nothing new to Ukrainians. Previous revolutions were to a great extent caused by the feeling that the government was not acting fairly (hence the “Revolution of Dignity”). Therefore, in view of low levels of trust that Ukrainians have in all branches of power, genuine reformers should be interested in a quick progress of reforms in the areas of the rule of law and struggle against corruption, first of all in the higher echelons of power. If this does not happen, a negative assessment of selective reforms by voters should not come as a surprise.

In order for the new government to gain trust and win electoral support, it is important to implement those reforms that can bring quick visible results (similar to the reforms of civil services and police in Georgia). Therefore, Groysman’s decision to simplify the registration of medicines was a very timely and important first step.

It may be very difficult to push through some reforms. Yet reformers should not disregard the readiness of Ukrainians for action, which they demonstrated during the Euromaidan and fighting the Russian invasion. Ukrainian politicians have never tried to use it systematically in order to overcome the resistance to reforms. Voters are not just passive clients or strict judges. They can become powerful allies of reformers.

Conclusion

Both academic studies and the experience of neighboring countries suggest that the “Juncker Curse” is an exaggeration: reforms need not end with the defeat of reformers. Therefore, Volodymyr Groysman is not doomed to become a political kamikaze if he undertakes substantial reforms. However, he could benefit from the experience of other reformers. It can be difficult to follow some of the advice, but even the first steps in the right direction would send positive signals. Let us hope that we will see them very soon.