Opinion: A new approach to government reform is needed

The recent backlash against reforms in Kenya illustrates how reformist leaders face a difficult balancing act between financial market pressure and an increasingly disenfranchised population. In June, President William Ruto of Kenya rescinded a controversial tax plan and dismissed almost all his cabinet after protesters were killed and parliament building was set ablaze. The bill consisted in a series of taxes including a levy on imports on digital and essential goods. The bill was put forward and voted by parliament despite being widely unpopular. Ruto inherited high debt levels, but rising deficits prompted a move to borrow from international markets to avoid a default. High debt service costs further convinced the authorities to apply fiscal austerity measures to restore market confidence. In turn, austerity has led to a popular backlash. Ruto is facing a juggle between pressures from financial markets and a population that has become increasingly disenfranchised after several years of high inflation that has eroded households’ purchasing power. Reformist leaders are up against a particularly complex environment, and this is playing out all around the world. Many of these leaders have prioritized curbing public deficits to calm financial markets but that has come at the expense of people’s anger. Indeed, distrust of governments has become pervasive in many parts of the world including in advanced economies. After the COVID-19 lockdown, reformist President Emmanuel Macron of France pushed a heavily contested pension reform which eventually was passed into law in 2023. The controversy associated with the pension reform loomed large in the legislative elections in July and resulted in a hung parliament and deadlock. Macron's reformist drive has left scars in French society — the yellow vests movement erupted after the introduction of a controversial fuel tax. Argentina’s President Javier Milei is committed to reform but also faces a struggle between market pressure and his population. In addition to his early success in bringing down inflation and deficits, Milei has also pushed a new bill on privatization and tax through parliament. While inflation has declined sharply, poverty has reached a 20-year high which could eventually derail his agenda. What is more is that there is a real risk that reformist leaders confronted with popular resistance may take an authoritarian turn, further alienating their populations. The cost of reform pushed forward to tame market pressures such as consumer subsidy cuts, raising taxes and exchange rate devaluation tends to fall disproportionately on the more vulnerable segments of the population. The rising aspirations of an increasingly more educated and young population in many parts of the developing world contrast with mediocre economic growth and high debt levels calling for macroeconomic stabilization and fiscal austerity. Social media also serves to amplify the existing discontent. The technology allows individual citizens to swiftly react to missteps by distrusted governments and drive sentiments. The inability of many governments to deliver or maintain quality and affordable public services, coupled with the perception of official corruption, tends to exacerbate distrust. For instance, on the African continent, the challenge for many governments to set up processes to deliver reliable basic services such as electricity is at the heart of the distrust fueling widespread protests. A new approach to reform A new approach to reform is needed. Take the case of reform of universal subsidies like fuel subsidies — also championed by international organizations such as the International Monetary Fund and the World Bank. While the rationale for phasing out these subsidies is strong on both economic and environmental grounds, reforming these fuel subsidies is difficult on social grounds. Attempts to do so have often been reversed after protests, including in Kenya. It seems appropriate in the context of distrust that reformist leaders should first showcase their ability to improve their performance in public services. This would likely lead to an improved quality of services and make it easier to then charge higher tariffs including for electricity to consumers who could see those as justified. Creating mechanisms of accountability including to limit corruption, transparency, and disclosure are essential in a reformist context. In too many countries, there is limited open government, which in turn limits the likelihood of achieving trust in open and fair markets. For instance, a lack of transparent public procurement and traceable payments and receipts from and by the administration can encourage red tape and elite capture. Or take the absence of disclosure of data and statistics, which prevents evidence-based policymaking and the ability for governments to self-correct and avoid big mistakes. The burden of reforms in many countries should first fall on government members and their entourage, to catalyze the broader population’s acceptance of transformative reforms. It is also about the “little things.” The design of reforms should account for seemingly small items. For instance, removing price controls on certain popular staple foods, as even though they are not significant budgetarily, these staples can carry a hugely symbolic character for the population. A common thread in the massive protests which have rattled the streets of the Arab world is the importance for individuals of preserving their dignity. Such dignity is to be found in both big and small ways. Reforms should combine the need to preserve that element of dignity and eventually through economic reforms and social protection gradually shift away from the universal subsidy system to sustainably empower individuals. The lesson from Kenya’s aborted reform plans is that reformist leaders should change their ways to account for the times of distrust. These leaders need to carry out a consistent set of reforms and ensure that these reforms are underpinned by the strong approval of the broader citizenry, especially the youth. To do so, they should initiate reform programs with trust-building measures such as fostering transparency in government, balancing measures between households and corporations, and committing to stay away from the temptation of an authoritarian turn.