CONTROVERSIAL INFLUENCE OF INSTITUTIONAL REFORMS ON THE FUNCTIONING OF THE ECONOMY

Abstract

Reforms affect the efficiency of the economy through mechanisms of resource mobility, expectations, trust, shadow sector dynamics, corruption and economic freedom and the overall innovation capacity of the economy. The nature and content of these influences are controversial and sometimes uncertain. Therefore, when planning the “next wave” of reforms, it makes sense to take into account the specific features of relationship between changes in institutional environment and processes of functioning and development of the economy. Reforms are preceded by a critical rise in uncertainty, which manifests itself in mass institutional, market and technological destructions. Such gaps, destructions and problems cannot be overcome within the framework of the old system of rules and actual distribution of powers and responsibilities of the participants in the economic system, since no subject regards the destructions as belonging to the sphere of his responsibility and authority. The content of reforms is a conscious change in the distribution of economic power within society. The most consistent with the identity of society and the state are evolutionary changes or endogenous reforms that reflect internal redistribution of economic power, market and technological changes in the national economy. Institutional reforms always contain an essential element of uncertainty, which manifests itself in short- or medium-term risks of a decrease in efficiency and long-term stagnation of the system. It should be acknowledged that the greatest risk of institutional change is destruction of identity and the complete loss of subjectivity. An important precondition for understanding the impact of reforms on the economic system is to take into account the national historical context. If reforms are consistent with the historically established value identity of the population, fix or continue evolutionary changes in the value-like institutional structures of society, then the likelihood of success of such reforms will be relatively higher and these reforms will be able to ensure tangible growth of public wealth, strengthening national competitiveness, technology development and further socialization of the economy.