According to an International Monetary Fund blog jointly written by Silvia Albrizio, Bertrand Gruss and Yu Shi, the global economy is stuck in a low-growth gear, largely because of aging populations, weak business investment and structural frictions that prevent capital and labor from flowing to where they can be most productive.
According to their IMF blog, demographic pressures are intensifying, and the green and digital transitions call for significant investment and resource reallocation across companies and industries. However, based on their observation, some countries are poised to fall further behind, making it even more urgent to update the rules that shape how economies operate. They point out that although specific policy priorities differ across countries, many economies share the need to ease market entry for new businesses, foster competition in the provision of goods and services, encourage workers to stay in the labor force, and better integrate immigrant workers.
Reforms, they argue, need broad societal support, yet public discontent has mounted since the global financial crisis.
To build trust and public support, they point out, policymakers need to improve communication, engage the public when designing reforms, and recognize that some people may need support if the reforms hurt them.
Based on their analysis of factors that shape public attitudes toward reforms, they noted that resistance often extends beyond mere economic self-interest.
Personal beliefs, perceptions, and other behavioral factors, their research showed, account for about 80 percent of support for reforms from more than 12,000 people across six representative countries.
Crucially, they said, knowledge and misperceptions about the need for reform and the effects of policies are the primary predictors of differences in policy support. This is important – and encouraging – because it offers a clear area for policymakers to act.
Perceptions of distribution and fairness are also critical. Reform opponents often worry more about the impact on their communities, particularly the most vulnerable, than on themselves. For example, opponents fear that reforms to increase the role of the private sector in the electricity and telecommunications industries would make those services less affordable and reduce access for the poorest.
Lack of trust, they warned, could also fuel opposition to reforms. People who say they oppose reforms, even if their concerns were to be adequately addressed by additional measures, mostly cite general distrust of the parties involved and doubts about the government’s ability to implement policy changes and mitigate any harms.
Their analysis suggests a multi-faceted strategy can ease resistance to structural reforms. Thus, they suggest the provision of the following:
Information: Effective communication is at the core of a successful reform strategy. This goes beyond advertising the reforms. Policymakers must convincingly explain the need for change, the expected effects, and how they might be achieved. Providing clear and nonpartisan information that corrects misperceptions significantly increases public support. For instance, it led to more than 40 percent of those who were opposed to migrant integration policies in the team’s survey to change their minds.
Engagement: Dialogue between officials and the public should be two-way. Allowing people to help shape policies and voice concerns fosters a sense of community ownership over reforms, making individuals more likely to support proposed changes.
Mitigation: Acknowledging that reforms may hurt some groups and addressing those concerns with tailored mitigating measures is essential to gaining public support. And it should be grounded in the previous pillars. Mitigations like temporary cash support or training programs should be informed by two-way dialogues between officials and citizens.
Trust: The critical pillar on which all three above rely is trust. Effective communication requires confidence in both the message and the messenger. To build trust in the process, the engagement with citizens needs to start early, in the policy design stage. And reform design mechanisms should reassure the public that the government will deliver on mitigating commitments when reforms are done. Establishing credible and independent government bodies to conduct and validate policy analysis can be particularly helpful. First-generation reforms to address corruption and improve governance are fundamental to restoring faith in institutions.
Policymakers, they stressed, need to enhance their toolkit to build on this strategy and make reforms more acceptable to people. Public forums, pilot programs, and opinion surveys can help inform a two-way dialogue with citizens. Large-scale surveys, focus groups, and other participatory tools can identify concerns, craft adequate mitigations, and build consensus for reforms. New civic technologies, such as digital community engagement platforms, should also help more citizens participate.
Effective reform design requires thorough consultation, communication, and mitigation to compensate those who might be hurt. Better tools to encourage participation will help people better understand proposals and build the public trust needed to carry out vital economic reforms. These principles should also be reflected in the IMF’s periodic reviews of its program, surveillance, and capacity development initiatives.
I found this IMF blog post to be quite interesting because, as a media practitioner, I have always found Philippine economic managers to be reluctant to sit down and educate even economic reporters so that we can help disseminate the government’s policies better and more clearly to an increasingly disconnected public.
In fact, in my own experience, the government has always been secretive, forcing us to seek other ways to get the news and information that should be made available so that our articles become more informative and educational, which in turn helps the readers – the public – understand how the economy and economic decisions affect them.