Gulliver's Travels by Jonathan Swift is one of my favorite books. It has many allusions to the political situation in 18th century Europe described in a genre of political satire. One of the major themes in the book is the so-called egg dispute between the Lilliputians who preferred cracking open their soft-boiled eggs from the little end, and Blefuscans who preferred cracking the big end.
Deep ideological differences between Big-Enders and Little-Enders even led the countries into war against each other. Lilliputians and Blefuscans could have benefited greatly by ending the war and engaging in free trade to their mutual benefit.
However, the issue that was irrelevant for economic development plagued their relationships and considerably reduced potential for economic growth and prosperity. The seemingly ridiculous and artificial example of the egg dispute illustrates a very deep problem faced by many nations over and over again: ideological differences often prevent political parties from reaching a consensus over mutually beneficial economic policies.
By using this example, Jonathan Swift satirized the animosity between Catholics and Protestants to illustrate how 'trivial' matters often spoiled the relationships between two nations - England and France - and slowed down their economic development.
My task here is to explain how economists view this problem and how, in my opinion, the current political and economic situation in Ukraine is related to the egg dispute.
Democracy is a powerful political system that proved to be very successful in generating economic prosperity and political stability in many countries.
There is a catch, though, nicely explained by Barry Weingast from Stanford University. He studied why democracy was a stable and effective form of governance in some countries and why it failed in other countries by looking at interactions of population and elites.
Democracy works efficiently when there is a wide consensus over the ideological values across different groups of population. When the population is ideologically united and determined to protect their economic and political rights, the ruling elites are forced to sign a mutual pact even if they have serious conflicts of interest. The elites have limited opportunities to manipulate public opinion and prefer to follow the rules and agreements that mark the boundaries of their political powers specified in the pact.
The Glorious Revolution in England in 1688 was an illustration of Weingast's ideas. In the aftermath of the revolution, the Bill of Rights had been signed in 1689. The document declared the separation of powers between the Crown and the Parliament and outlined the basic rights of the citizens that could not be violated by anyone, including the King and other influential individuals. The Bill of Rights proved to be very successful and laid down the basis of the unwritten British Constitution because it was accepted not only by elites but also by the citizens.
On the other hand, a democratic country may be trapped into political disputes and economic stagnation if a broad consensus of citizens has not been reached. In these circumstances, any political agreement among elites is unstable and frequently violated.
The problem of finding common ideological ground becomes more severe when a country is sharply divided in religious, ethnic, or cultural dimensions. In his study, Weingast pointed out directly that countries with culturally or ethnically diverse population have major difficulties in finding social consensus and implementing efficient economic policies.
The Universal of National Unity signed in August of 2006 by the President and by four political parties represented in the Verkhovna Rada in Ukraine was meant to unite the nation and elites over some basic principles. However, as we all observed, the Universal proved to be extremely ineffective in reaching its declared goals.
The Universal was not reached as the consensus across various groups of the whole population but was worked out as a partial compromise of political elites. Therefore, the Party of Regions felt comfortable to violate the Universal because it was not obliged to follow the principles declared by the party's supporters.
The Ukrainian example is not unique. The most culturally and ethnically diverse countries are located in Africa according to a study conducted by Alberto Alesina, a highly regarded Harvard University economist. Therefore, it is not surprising that African countries have major difficulties in forming stable governments and experience frequent military coups.
Many Latin American countries also experienced political cycles during the 20th century, oscillating from democracy to dictatorship to democracy again. In those countries, political parties exploited ideological differences and spent resources to win political fights at the expense of economic reforms.
Why do voters often prefer to fight over "the right way" to break an egg rather then discuss strategies of economic development? An individual's political choice depends on many things. We care about our economic well-being, ecology, culture and many other issues that are important for us.
When voting, we try to find a political party that would closely match our views on those problems. However,
it is rarely the case that the match between the voter's preferences and political party programs is perfect. It is even less likely that the voter has all the knowledge and information required to evaluate how various economic and social policies offered by different political parties might influence his or her future. Therefore, the voter simplifies his task by identifying the most important issue that he feels comfortable to judge and votes accordingly.
For an individual voter, it is extremely hard to evaluate how a party's economic policies might influence his or her economic well-being. At the same time, he or she has cultural and ethnic ties associated with specific policy options and feels comfortable about making a political choice in that dimension.
As a result, deep discussion on economic and social policies that would benefit the majority of population in Ukraine such as creating competitive market environment, legal system reform, or development of the financial system are sacrificed in favor of hot ideological disputes about the status of Russian language, accusations of being Russian/US puppets, or initiation of a referendum on NATO.
Regression analysis of the last parliamentary elections shows that the choice of voters was primarily driven by ideological and cultural differences. The share of Ukrainian and Russian speaking population at the oblast level - an indicator of cultural differences -explains about 86 percent of all variations in the share of voters who voted for the "Party of Regions".
Likewise, this explains 74 percent of the cross oblast differences in voting patterns of the Block of Yulia Tymoshenko (BYT) supporters. The age distribution of voters - which to a great extent captures the ideological differences - explains a sizeable part of the pattern of Communist (CPU) and Socialist (SPU) party supporters across the regions.
The regions with large populations of voters over 50 years old are more likely to vote for either the Communist or Socialist Party with about 40 percent of variation in the voting behavior at the oblast level explained by the age distribution.
The ideal solution would by to put aside our differences and concentrate on common economic interests. If our politicians accepted the current division of power and started working on reforming the tax system, legal system, social security, education and medicine we would all benefit, regardless of the language we speak. Unfortunately, our political leaders will not leave well-enough alone and try as hard as they can to exploit our differences in their political games. They have done it many times before and I see no reason why they would be willing to stop these practices.
There is hope though. Speaking of the long term horizon, Ukraine is demographically drifting to the European Union. First of all, the population mass is literally moving to the west - Western regions of Ukraine and Kyiv outperforming Eastern regions in the demographic dynamics - due both to natural demographic changes and to migration processes. Secondly, the younger generations of Ukrainians are less likely to vote for parties with the socialist or communist ideologies, as the regression analysis showed. Both trends work in favor of the Europe-oriented liberal economic model of development and reduce ideological and cultural differences for the whole country.
The question that remains: can we afford waiting so long?
Oleksandr Shepotylo, Ph.D., is an assistant professor of economics in the Master's Program of the Economics Education and Research Consortium in Kyiv. In addition, he conducts economic research in connection with the Kyiv Economics Institute.
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