Oleksandr Nosal

CEO and Founder at ICR

Oleksandr Nosal: Reforms and Civil Society

It is an open secret that the state in Ukraine is extremely inefficient when it comes to its main functions. Volunteers in the ATO, activists and numerous NGOs that provide for the front lines and help internally displaced people – all of the aforementioned civil society structures do not just control the state, as it is practiced in developed countries. In fact, they execute multiple direct state functions, and do this much more effectively than bureaucratic, outdated, inherited-from-the-Ukrainian-SSR state apparatus. These organized groups are the propellant that has allowed our country to not fall into the abyss, and helped the country overcome many obstacles which it has faced.
From the perspective of a citizen of Ukraine and a consumer of state services, the state appears corrupt, backward and hostile to the average person. Instead, if one looks at the situation from the bureaucracy’s perspective, the system works like a clock. Our state was created by officials, for officials and on behalf of officials. This is the classic “state with limited access” as defined by Douglas North that we have to finally turn into “the state with open access”, a society with equal opportunities for everyone.
With the corrupt state apparatus our inherited problems have spanned almost all of the 20th century: Revolutions and wars which killed the best sons and daughters of Ukraine have destroyed, to a large extent, the nation’s genotype. Existence in the USSR itself was a good example of negative selection, when duplicity, deceit and subservience were keys to success, or at the very least, survival. Do you remember the saying “Initiative is punished”? The negative effects of such attitude still remain, and they will, unfortunately, interfere with our development for a long time. However, we should fight this entrenched way of thinking and operating fiercely, squeezing it out drop by drop.
The worst thing is not that the outdated and corrupt state apparatus is hostile toward the average citizen, but the fact that, under the circumstances of the economic crisis and foreign military aggression, this highly inefficient structure threatens the very existence of Ukraine. Right before our eyes the following, simple universal principle is in action: the Ukrainian state either evolves, changes, becomes efficient, or just disappears. Either there are reforms, or there is no more Ukraine. And, these are not some exaggerated statements or panicked reservations. We see that this is the reality in which we live; part of our state is occupied, part has been annexed, the external debt is increasing dramatically, and the economy is on the brink of default.
So what is meant by “reforms”, which are currently being discussed by everyone? And where do we start? Ukrainian reforms, in their essence are not unique; they are those post-communist movements that have successfully transformed Poland, the Baltic countries and, most recently, Georgia. However unpleasant it is to admit, Ukraine has been wasting time. The twenty-four year transitional period ended in transition into a deep crisis. But, there is nothing surprising about it: it is because of the inefficiency of the system and its governing that the USSR ceased to exist as a state entity. So, why would the state apparatus inherited from the Ukrainian SSR, the fragment left over from the Soviet Union, suddenly be efficient? If we also add to this the fact that during these twenty four years the bureaucracy became intertwined with the big capital creating something that is called oligarchy, we will get the full picture and scale of what we are dealing with.
The common trait in all successful post-soviet reforms is that all of them were radical, comprehensive, deep and pervasive. It is impossible to transform a single component in a global system, where everything is connected. It has been proven in many instances by many countries that half-steps, half-hearted reforms are worse than doing nothing at all. In this case the whole idea of modernization and reforms that have to be somehow implemented is discredited.
Deregulation is the core of liberal reforms, their cornerstone. The state’s role in social relations must be cut down radically, since we are talking not about an abstract ideal state, but about the modern Ukrainian state apparatus. And we understand clearly why and in whose favor the state, in the form of bureaucracy, intervenes in public life and economic processes. As long as the state machine possesses such a wide range of powers: licensing, regulatory, etc., officials will always be tempted to use them for their own material interests or for the benefit of their financial backers. Corruption can not be overcome only by fighting it. Once again we are dealing with a complex system, and the whole system needs to be changed, not its separate part or its manifestations. Simple things should be conveyed to people: if you want to be rich – go into business and make money. Public service is all about serving a country and its people. Here, one should not make millions, but a decent standard of living should be provided. At the same time, the system should create the most comfortable conditions for business development, simply by not interfering and ensuring equal conditions for everyone.
Critics of deregulation often use the same argument that it will lead to a significant reduction of the number of civil servants, throw people, for whom this job is the only means of survival, out on the street. However, let’s face it: what is the average salary of an official? 100-150 euros. For Ministers – 300. Thus, on the contrary, we are doing these people a favor: having their own business or working in a private structure, they will earn at least two to three times more.
The spirit of reforms is extremely important. Forms and methods may vary, depending on unique traits of each country or governmental programs. There is no algorythm or single correct way, but social life in general should be permeated by the very spirit of reforms. As the father of Georgian reforms Kakha Bendukidze used to say, “You just need to do. Not wait. The eyes are afraid, the hands are doing.” Unfortunately, we are still waiting for governmental reforms. Too little has been done in the last year. There is even nothing to evaluate. We see mostly declarative programs like Program 2020. If there are specific steps taken – they will be evaluated. It is just like in music: if you hit the wrong note – the experts will hear it right away. And the task of the experts is to make these incongruities public. I am confident that we will succeed, and Ukraine will transform into a modern, reformed, prosperous European state. And in many years historians will write: the success of reforms in Ukraine was predetermined, since an extremely strong civil society was the customer and the main performer of these reforms.