The World Bank’s “Governance and the Law” report directs the attention of the developing states to the fact that investments alone are not enough to ensure the speedy economic growth and successful transition to the modern economic age. Political reforms, too, are necessary for achieving this goal.
- “The development community has largely focused its reform attempts on designing best-practice solutions and building the capacity needed to implement them. Capacity, often considered a prerequisite for policy effectiveness, is certainly important, and in many cases it is even an overriding constraint. At a given point in time, it can be thought of as a stock. How and where to use such capacity, however, are also the product of a bargaining process. Even if physical and administrative capacity exists, policies may still be ineffective if groups with enough bargaining power have no incentives to pursue implementation”.
- “Thus investing in capacity may not be enough. Designing policies to improve security, growth, and equity requires understanding the balance of power among different actors. In the presence of powerful actors who can block or undermine policies, optimal policies from a strict economic standpoint (first-best policies) may not be the optimal implementable policies (second-best but feasible). Even when feasible, implementing what seem like first-best economic policies from a static perspective can lead to worse outcomes for society when such policies negatively affect the power equilibrium”.
- “From the perspective of power asymmetries, efforts to strengthen the ability of institutions to effectively enable commitment, coordination, and cooperation call into question many traditional practices of the development community. Anyone seeking to design more effective policies may find it helpful to recognize how the distribution of power in the policy arena could affect policy design and implementation and to consider how the policy arena can be reshaped to expand the set of policies that can be implemented”.
- Reshaping the policy arena occurs when changes are made in who can participate in decision-making processes (the contestability of the policy arena), when incentives to pursue certain goals are transformed, and when actors’ preferences and beliefs shift. 20 As an illustration, consider how countries are more or less effective at redistributing income through the fiscal system. The average measure of inequality (as captured by the Gini coefficient) based on individuals’ market income is 0.47 for developed countries and 0.52 for developing countries. After the effects of taxes and transfers are taken into account, the corresponding coefficients drop to 0.31 and 0.50, respectively. If the effect of publicly provided services (in particular, education and health) is also included, inequality falls further: to 0.22 in developed countries and to 0.42 in developing countries.21 The quantifiable redistributive capacity of these countries can be interpreted in different ways. It can be interpreted as the relative ability of different actors to influence and contest decisions about how resources are distributed in a given country. It can be interpreted as the incentives of governments to commit to the collection of taxes and allocation of spending—more checks and balances on power are associated with more redistribution.22 Or it can be interpreted as the preferences for redistribution in a given country.
- Who is included and who is excluded from the policy arena are determined by the relative power of the competing actors, as well as by the barriers of entry to participation (that is, how contestable the process is). A more contestable policy arena is one in which the actors or groups who have reason to participate in the decision-making process have ways to express their interests and exert influence. Because contestability determines who is included and who is excluded from the bargain, it is closely linked to the notion of inclusion. However, it also emphasizes the barriers to participation. Although the inclusion of more actors in the decision-making process is not necessarily a guarantee of better decisions, a more contestable policy arena tends to be associated with higher levels of legitimacy and cooperation. When procedures for selecting and implementing policies are more contestable, those policies tend to be perceived as “fair” and to induce cooperation more effectively.
- The incentives that actors have to comply with agreements are fundamental to enabling commitment in the policy arena. Credible commitment requires consistency in the face of changing circumstances. Incentives for actors to commit to agreements are thus crucial for effective policy design and implementation. Stronger incentives to hold policy makers accountable can also strengthen voluntary compliance because repeatedly delivering on commitment helps build trust in institutions.
- Preferences and beliefs. The preferences and beliefs of decision-making actors matter for shaping whether the outcome of the bargain will enhance welfare and whether the system is responsive to the interests of those who have less influence. Aggregating preferences, for example, can increase the latter’s visibility. Because the preferences and beliefs of actors shape their policy goals, an important condition for policy effectiveness is the coordination of actors’ expectations”.
- “Power-sharing bargains that lead to peace and security typically take place between elites. Such bargains encourage cooperative behavior by providing elite groups with the incentives to compromise with one another and to inspire inclusion among their followers, and by offering alternative avenues for contesting power”.
- “Implementable policies can help reduce capture, enhancing growth. Security is a precondition for prosperity, but it is not enough; economic growth must follow. When it comes to growth, if the possibility of capture looms large, policies that are first-best on the basis of economic efficiency may be less implementable than second-best ones.
- Adopting an implementable second-best design could therefore be more effective than choosing the seemingly first-best policy prone to capture. Moreover, when considering alternative policy designs, the possibility of future capture can be reduced by anticipating the possible effects of a policy on the balance of decision-making ability among the actors involved.
- The experience of the Russian Federation and eastern European countries in their transition to market economies is illustrative.26 Compelled by the then-dominant economic argument that the privatization of state-owned enterprises (SOEs) was of first-order importance in enhancing economic efficiency, Russia and many eastern European countries focused on rapid, large-scale privatization of their SOEs. Although this approach may have made sense on purely economic grounds, the way in which the privatization wave was implemented created a new class of oligarchs that resisted the next generation of pro-competition reforms. As a result, many of these economies are still struggling with inefficient, oligopolistic industries.
- This is consistent with the view that reforms that create an initial concentration of gains may engender strong opposition to further reform from early winners.27 By contrast, Poland chose to focus first on reforms that made it easy for new firms to enter, and to privatize the existing firms more gradually. This sequencing created a class of young firms that were collectively interested in further reforms, while preventing the sudden emergence of an influential group of large firms that could block reforms.”
One of the crucial problems Akorda is facing today lies in the fact that, overall, the Kazakhs do not see a correlation between the political initiatives of the government and their own personal well-being. As a result, only a small number of people are actively participating in the attempts to speed up the socio-economic development of the country. Moreover, the majority of those few do it not on their own initiative but out of the necessity of the service. Hence all the governmental initiatives fail.
This is the historic price (and penalty) for Akorda’s attempts to nurture a new man who would be active in any sphere of life except the political one. Therefore, the Kazakh elite must read and comprehend the following statements from the report.
“Even if physical and administrative capacity exists, policies may still be ineffective if groups with enough bargaining power have no incentives to pursue implementation”
“Anyone seeking to design more effective policies may find it helpful to recognize how the distribution of power in the policy arena could affect policy design and implementation and to consider how the policy arena can be reshaped to expand the set of policies that can be implemented”.
It is obvious (and the WB experts confirm that) that “Although the inclusion of more actors in the decision-making process is not necessarily a guarantee of better decisions, a more contestable policy arena tends to be associated with higher levels of legitimacy and cooperation”.
This is because “When procedures for selecting and implementing policies are more contestable, those policies tend to be perceived as “fair” and to induce cooperation more effectively”.
The report also contains an important comment on the difference of the nature of the 1990s privatization in Russia and Poland. We have cited it above. Pursuing this thought, we will consider the obvious difference between the political systems in Russia and Kazakhstan. With all the similarities, they are still different, and that can largely be explained exactly by the nature of the process of the original accumulation of capital in the countries.
Indeed, in Russia, the privatization was of an obviously oligarchic nature. Nonetheless, the bulk of the population participated actively in it. Of course, the majority of the Russians obtained the ownership of the lodgings where they lived and the vouchers but it was still significantly more than what the Kazakhs were able to obtain. The privatization coupons in Kazakhstan, unlike the vouchers in Russia, did not circulate freely thus turning from assets into definitive losses. Besides, the privatization of the individual projects in Kazakhstan was even more oligarchic than in Russia.
As a result, today Russia has a contra-elite, both systemic and non-systemic political opposition, civic society, active nongovernmental sector. Yes, all of those are kept under the pressure from the Kremlin (and this pressure has increased during recent years), but it is still easier and safer to take to the streets in Russia than in Kazakhstan. Street protests in Russia are allowed more often and cleared away less frequently.
Perhaps this is not only because Russia’s population is bigger than Kazakhstan’s. The reason may also lie in the fact that Russia is more politically balanced and the ruling elite is more sensible in its domestic policy. The latter means that the Russian elite is less afraid of the people and the responsibility for its actions.
*World Bank, 2017. “Governance and the Law”. Overview. WB, Washington, D.C. Creative Commons Attribution CC BY 3.0 IGO