Guriev: The changing political economy of reforms

1. The changing political
economy of reforms
Sergei Guriev
Sciences Po, Paris

2. The traditional narrative
Distributional impact: reforms generate winners and losers
• Must be able to compensate the losers
• Need state capacity to redistribute
Time dimension: short-term pain, long-term pain
• Need patient voters and their confidence in the elites
• Need long-term oriented elites
• E.g. established political parties
Communication strategy: good reforms sell themselves
• Need public trust in experts
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3. Challenges already before the global crisis:
Lessons from the post-communist transition
Major backlash after the first round of reforms
• Reforms delivered on average
• But not for the median voter:
only for the top 44% transition reduced the income gap vs. the West
• Not just rise in inequality but rise in unfair inequality
• Emergence of oligarchs with political influence and media ownership
The backlash brings anti-reform populists to power
• Build crony capitalism
• Subvert (relatively weak) democratic checks and balances
• Pro-reform politicians cannot come back to office
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4. Share of respondents supporting market economy
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Source: EBRD (2016)

5. Evolution of income distribution in post-
communist countries
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Source: EBRD (2016)

6. A typical country-level “elephant curve”: Russia
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Source: EBRD (2016)

7. Political economy of reforms after the crisis
European (and American) trust crisis
• Rise in unemployment -> rise of populist vote
• And decline in trust in national and European elites
• No impact on interpersonal trust
• Disintegration of traditional parties
Internet and the populist narrative
• expansion of mobile internet reduces confidence in government
… benefitting populist opposition (but not the green opposition)
• “this time is different”: social media have low barriers to entry + user-generated content
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Source: Algan et al (2017)

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Source: Guriev et al (2019)

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Source: Guriev et al (2019)

11. Way forward
Fair competition and anti-oligarch agenda
• Anti-trust policies
• Political and media anti-trust
Fair redistribution
• Fighting global tax evasion
• Increase labor’s bargaining power: UBI vs. unions/min.wages?
• Equal access to public goods
Rebuilding trust
• Deliberative/participative democracy (citizens’ assembly, participative budgets etc.)
• Opening up elite selection
Communication strategy
• Time to stand up to populists online
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