Technocratic Traps of Policy Reforms

ST. PETERSBURG: A society ignores its technical experts at its peril. Nations that hope to contribute and compete in the modern world require skilled professionals, especially in complex areas such as taxation and banking. Political leaders cannot govern without such professionals.

Power struggles, the essence of politics, often inhibit the most efficient policies. Numerous reform projects are implemented only partially, or in distorted ways, producing unanticipated and undesired outcomes. Such contradictions prompt searches for technocratic mechanisms to improve policy quality and limit the whims of politics. The experience of post-Soviet Russia demonstrates the opportunities and constraints inherent to technocratic mechanisms of governance. In the 1990s, analysts widely perceived competitive and polarized politics as a hindrance to economic transformation. Conversely, in the 2000s, Russia achieved some policy advancements at the expense of degradation of politics. Political support is not a guarantee of policy success, and insulation of policy changes from politics brought mixed results at best.

The Kremlin, like any government, strives to avoid major crises in governance and seeks foolproof approaches, at least for the economy and finance. Thus, promotion of reforms or even maintenance of the status-quo by technocrats legitimizes the politico-economic order with benefits for the Kremlin.

Corruption, monopolies, distorted trade practices contribute to unfair distribution of benefits, what economists refer to as “rent-seeking.” Powerful interest groups resist major policy reforms and improved governance. The struggle between technocratic reformers and rent-seekers over policy decisions has been at the heart of turbulent changes in Russia since 1991. Technocrats have fallen into a trap, their role in policymaking diminished over time. Trends include:

Delegation: Policy reforms require professional expertise, with results unpredictable by definition. It is no wonder that political leaders delegate the role of reform to officials with specialized competences who can then be blamed for undesirable outcomes. At first glance, delegation seems to facilitate autonomy of technocratic policymaking from politics. However, this model opens a window of opportunity for rent-seekers and their unfair gains, whereas the specialists’ opportunities to build pro-reform coalitions are limited. Possible positive changes are reduced to a limited number of “pockets of effectiveness,” with unfavorable odds of extension to other policy areas. Technocrats’ discretion is limited to advice in development of programs without power over key decisions or control over implementation.

Influence of interest groups: In present-day Russia, bad governance aggravates limitations of the technical experts. The rise of informal actors – oligarchs and cronies whose policy influence is often much greater than that of government officials and other experts – leads to notorious efficiency. Meanwhile, policymaking is not insulated from politics, and any change can offer opportunity for more corruption, such as in case of privatization in oil sector.

As a result, Russian reformers find themselves in a difficult place. Political leaders and the public expect policy successes, and reform plans meet with fierce resistance from interest groups and the state apparatus. The conflict has contributed to privatization of gains and nationalization of costs. Russian citizens bear the costs of policy changes while oligarchs and rent-seeking cronies are the main beneficiaries.

Public opinion: Approval ratings of Russian political leaders largely depend upon mass evaluations of policy performance. Despite incentives for reforms, public opinion generates short-term risks of declining support for political leaders over unpopular measures. Even relatively minor bumps on the road – like the poorly conducted attempt to replace pension increases and other benefits with small cash payments – prompted protests in 2005 and resulted in postponement of many policy changes. The notion of “reform” became taboo in Russian political discourse.

Russia has social and economic development needs that require technocratic reformers in state ministries and agencies. Yet “demand” for reform declined over time as the “supply” of reforms was increasingly rejected. According to one analysis, less than 40 percent of the Strategy 2010 program of socioeconomic reforms, approved by the Russian government in 2000, was implemented. A similar program, Strategy 2020 – intended to diversify Russian exports while increasing economic growth and domestic consumption and developed by many of the same policy – was curtailed with less than 30 percent of its plans implemented. In light of such experiences, the fate of new policy changes seems uncertain.

Personal priorities: Personal priorities of political leadership have become the major and sometimes only source of policy reforms. Such priorities can become an obstacle to reforms, too, contributing to economic decline. Due to domestic and international challenges, Russia’s rulers opted for reforms intended to reduce costs and increase benefits, both for the country and themselves as individuals. Leadership can change policy priorities, as happened with technological modernization set as a top priority during Dmitry Medvedev’s presidency, 2008 to 2012. Even in personalist authoritarian regimes, priorities can change overnight. For example, Vladimir Putin moved from economic development goals to geopolitical adventures after the 2014 annexation of Crimea.

Quick fixes and limited attention: While leaders concentrate on supporting a few reforms other agenda items may languish. Putin actively backed Russian tax reform in the early 2000s, but the other side of the coin was failure of other policies including pension reform. Changes in the tax system benefited the Russian state and its rulers soon after inception, whereas pension reform assumed benefits only in the long run while generating immediate transition costs and an increase in the retirement age. The technocratic reformers and political leaders lost interest in implementation of policies that might produce returns only decades later. Partial and contradictory 2002 pension reform only postponed problems, and conditions for major changes have become less favorable over time.

Political support is vital for technical experts, providing leverage for overcoming resistance to reforms. Sometimes this support is not enough, and strong interest groups can divert policy changes as happened with Russian police reform in 2010 and 2011. Reform aiming to improve efficiency was essentially limited to window dressing and reshuffling personnel. Technocrats can rarely impose control over policy implementation – especially if policies require coordination of various agencies. It is no coincidence that while the Ministry of Finance and the Central Bank of Russia conducted successful macroeconomic policies, targeting inflation and implementing tax reforms, welfare policies lagged. State finance depended on decisions made by a narrow circle of technocrats, whereas welfare policies required complex coordination of multiple national and subnational agencies. Given weak incentives for reforms, efforts of technocrats and political leaders were not enough.

The technical experts cannot protect reforms from partial and inconsistent implementation. Incentives are in place for quick fixes and immediate results while proposals for long-term advancements may be postponed or result in unworkable compromises. Poor quality of the bureaucracy and influence of interest groups distort goals, weakening outcomes. Technocratic tricks may deliver some success, yet the price may be prohibitively high in terms of social costs and policy irreversibility.